Please read these important disclosures carefully before deciding whether to participate in Altruist Financial LLC’s Fully Paid Securities Lending Program and before signing a Master Securities Lending Agreement for Altruist Financial LLC’s Fully Paid Securities Lending Program. These disclosures describe important characteristics of, and risks associated with engaging in, securities lending transactions.

I.     Introduction

Altruist (“Altruist”) offers eligible customers the ability to lend out certain of their fully paid and excess margin securities to Altruist, which Altruist may then lend to other Altruist customers or to other market participants who wish to use these shares for short selling or other purposes. “Fully Paid Securities” are securities in a customer’s account that have been completely paid for. “Excess margin securities” are securities that have not been completely paid for, but whose market value exceeds 140% of the customer’s margin debit balance. In this disclosure and in the relevant agreements, we collectively refer to fully paid and excess margin securities as “Fully Paid Securities” or “Fully Paid Shares”. Lending out your Fully Paid Shares may be a way to increase the yield on your portfolio, because in some cases, certain shares are in high demand in the securities lending market and borrowers are willing to pay a loan fee (or rebate) for the use of your Fully Paid Shares, and in other cases, certain shares are in demand in the securities lending market and borrowers are willing to take a rebate for the use of your Fully Paid Shares (but you can still earn income by lending out those Fully Paid Shares through Altruist).

In the Altruist Fully Paid Securities Lending Program (the “Program”), you permit Altruist to borrow from you any Fully Paid Securities in your portfolio and loan these securities out in the securities lending market. Altruist will have the discretion to initiate loans of your securities. You will not be asked to approve each loan before it is initiated, but you can sell your shares at any time or terminate your participation in the program. Altruist will pay you a loan fee for the shares that it borrows from you. Ordinarily, in cases where borrowers are willing to pay a rebate for the use of your Fully Paid Securities, Altruist will pay you a percentage of the rebate earned by Altruist for lending your securities (such amount, the “Lending Interest”). Altruist’s net rebate amount used to calculate your Lending Interest may be less than the gross rebate amount received by Altruist for relending your securities because of certain deductions and charges. In cases where borrowers are willing to take a rebate for the use of your Fully Paid Securities, Altruist will pay you a percentage of the value of the collateral Altruist is holding for you to secure the amount of the loan (such amount, the “Collateral Interest”).

II.     Basic Mechanics of a Fully Paid Lending Transaction

When the lending transaction takes place, your securities will be designated as on loan. In return, Altruist will hold collateral for you to secure the amount of the loan. The current industry convention for the collateral calculation with respect to U.S. stocks is to multiply the security price by 102%, then round up to the nearest dollar, times the number of shares. Altruist marks-to-market all positions daily to reflect changes in security prices. Altruist reserves the right to adjust to US industry convention should that change or to raise or lower the collateral amount based on local laws or market custom outside the US; however, Altruist will never collateralize the stock loan for less than 100% of the value. For example, customer A has enrolled in the Program and Altruist has borrowed 5000 shares of XYZ from customer. XYZ’s closing price is $22.15. The mark-to-market is calculated by rounding $22.15 * 1.02 = $22.59 rounded up nearest dollar which is $23, making the collateral calculation $23 * 5000 = $115,000.

Altruist will be the counterparty borrower to all of the loans you make. That is, as a customer, you are transacting with Altruist, which may, in turn, then transact on any relevant market. For all transactions in which you are lending your Fully Paid Shares, Altruist will be the borrower and Altruist will be the party providing the collateral for you on the securities loan and paying your Lending Interest or Collateral Interest, as applicable, to you.

III.     SECURITIES LOANED OUT BY YOU MAY NOT BE PROTECTED BY SIPC.

THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT YOU WITH RESPECT TO YOUR SECURITIES LOAN TRANSACTIONS IN THE PROGRAM. THEREFORE, THE COLLATERAL HELD FOR YOU MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF ALTRUIST’S OBLIGATION IN THE EVENT ALTRUIST FAILS TO RETURN THE SECURITIES.

IV.     Loss of Voting Rights.

The borrower of securities (and not you, as lender) has the right to vote, or to provide any consent or to take any similar action with respect to the loaned securities if the record date or deadline for such vote, consent or other action falls during the term of the loan.

V.     You Can Sell Your Loaned Shares at any Time.

Even though you have loaned your shares out, you can sell those shares at any time, just like any other shares in your Altruist account. You do not have to wait for the shares to be returned to sell them. Even if the shares are not returned on time to settle your sale of the shares, Altruist will be responsible for settling the sale, not you, and you will receive the proceeds from the sale of the shares on the normal settlement date for the sale.

VI.     You Continue to Own Loaned Shares and Have Market Risk on Those Shares.

When you lend your shares, you continue to own the shares and you continue to have the market exposure inherent in ownership of the shares (i.e., if the share price decreases while you own the shares but are lending them out, the value of your position will decrease).

VII.     Lack of Interest on Collateral.

You generally will not receive a separate interest payment from Altruist on the collateral that is held for your benefit when you lend Fully Paid Shares to Altruist. You will only receive the Lending Interest or Collateral Interest, as applicable, that is recorded for lending your shares (reduced by any commissions, management fees, or other applicable charges). The interest treatment on collateral may change from the above depending on the securities lending market and the collateral method.

VIII.     The Securities Loaned out by You may be “Hard-to-Borrow” because of Short Selling or may be used to Satisfy Delivery Requirements Resulting from Short Sales.

Certain securities are in greater demand in the securities lending market than other securities, and may be “hard to borrow.”  Borrowers are typically willing to pay higher rebates for “hard-to-borrow” securities; they may not be willing to pay rebates for other securities. When you lend your Fully Paid Securities, it is likely that such securities will be used to facilitate one or more short sales where the borrower is selling shares in hopes that the stock will decline in value (the short seller later re-purchases the stock to pay back the stock loan). Since you are holding the shares “long” in your account, the activity of short sellers potentially could affect the long-term value of your holdings.

IX.     Potential tax implications, including payments deemed cash-in-lieu of dividend paid on securities while on loan.

When you lend your Fully Paid Securities, you are entitled to receive the amount of all dividends and distributions made on or in respect of the loaned securities. However, you may receive cash payments “in lieu of” dividends. If you are a U.S. taxpayer, cash payments in lieu of dividends are not the same as qualified dividends for tax purposes and are taxed as normal ordinary income (up to 39.6%) instead of the preferential qualified dividend rate of 20% (U.S. federal income tax rates quoted here are for 2013 and are subject to change). If you are not a U.S. taxpayer, Altruist may be required to withhold tax on payments in lieu of dividends and Lending Interest or Collateral Interest amounts paid to you, as applicable, at 30% unless an exception applies.

It is solely within Altruist’s discretion whether to recall loaned shares from a borrower prior to a dividend, and Altruist makes no guarantee to recall a loan prior to a dividend. With respect to other corporate actions affecting loaned shares, non-cash distributions that you are entitled to receive in connection with ownership of loaned securities will be added to the loaned securities on the date of distribution and will be transferred to you at termination of the loan.

Other special tax considerations could arise, and you are encouraged to consult a tax advisor for further information.

X.     Altruist has a right to terminate any borrow transaction in the event of a condition of the kind specified in FINRA Rule 4314(b).

Altruist has a right to terminate any borrow transaction if you:

• apply for or consent to, or are the subject of an application for, the appointment of or the taking of possession by a receiver, custodian, trustee, or liquidator of you or of all or a substantial part of your property;
• admit in writing your inability, or become generally unable, to pay your debts as such debts become due;
• make a general assignment for the benefit of its creditors; or
• file, or have filed against you, a petition under Title 11 of the United States Code, or have filed against you an application for a protective decree under Section 5 of the Securities Investor Protection Act of 1970 (“SIPA”), unless the right to liquidate such transaction is stayed, avoided, or otherwise limited by an order authorized under the provisions of SIPA or any statute administered by the SEC.

XI.     Factors that Determine the Amount of Compensation Received by Altruist and Amount of Compensation (e.g., Interest Rate) to be Paid to You, and the Ability of Those to Change.

1. Loan Rates (and therefore Lending Interest or Collateral Interest You Will Receive) Are Subject to Frequent Change and Can Go Down (or Up) by 50% or More.

Rates for shares change frequently, even daily, in securities lending market and this can reduce (or increase) the amount of Lending Interest or Collateral Interest, as applicable, that you receive for lending your shares out, or could even impact the ability to loan your shares out at all.  This is because the value of securities in the securities lending market are subject to change based upon market conditions and borrowing demand. Likewise, in the case of Lending Interest, Altruist may change the rate it pays you compared to fees that Altruist receives when it lends your securities to third parties, and in the case of Collateral Interest, Altruist may change the percentage of the value of the collateral Altruist is holding for you to secure the amount of the loan that it pays you. You will not have direct control over when to initiate or terminate loans of specific shares (including based on rate changes). However, you can always terminate your participation in the program (which will terminate all of your lending transactions) if you are unhappy with the amount of Lending Interest or Collateral Interest you are receiving or the nature or frequency of rate changes. Please note, though, that if you terminate your participation in the Program, you may not be permitted to re-join the program, or you may have to wait a certain length of time to re-join.

2. Altruist is the Counterparty to All Fully Paid Lending Transactions with You. Altruist May Earn a Spread in Rates and May Profit or Lose Connection with the Transaction or Other Transactions in the Same Securities. Altruist May Pay Part of the Load Fees to Third Parties, Which will Reduce the Rate You Receive.

Altruist will be the counterparty (borrower) when you lend your shares. Any transactions that Altruist may or may not do on any securities lending markets are completely independent of your loan transaction to Altruist. Thus, after Altruist borrows shares from you at a given rate, Altruist may or may not then lend those shares to another party or to or through an affiliate or third party. Likewise, Altruist may terminate a loan with you and return shares to you while at the same time Altruist continues to lend shares of the same stock out to the marketplace. In short: Altruist’s obligation to you is to pay you the Lending Interest or Collateral Interest, as applicable, on ongoing loan transactions until such transactions are terminated by you or by Altruist. Nothing in the Program restricts Altruist’s ability to conduct stock lending and borrowing transactions with third parties, who may profit or lose in connection with the transactions.

Altruist may borrow shares from you and then lend those shares to one of its affiliates or other customers.

Altruist may earn a “spread” on securities lending transactions with your stock. This means that the rate you receive from Altruist for your loaned securities may be worse than the rate Altruist receives from a third party on those same shares.

Altruist may pay part of the net rebate amount (for shares you lend) to third parties such as introducing broker(s) who may introduce your account to Altruist. These payments may reduce the amount of Lending Interest or Collateral Interest, as applicable, you receive.

3. There Is No Guarantee That You Will Receive the Best Loan Rates for Your Shares.

The securities lending market is not a standardized and transparent market. Securities lending transactions generally take place “over the counter” rather than on organized exchanges where prices and transactions are transparent. There are no rules or mechanisms that guarantee or require that any given participant in the marketplace will receive the best rate for lending shares, and Altruist cannot and does not guarantee that you will receive the most favorable rate for lending your shares. Altruist may not have access to the markets or counterparties that are offering the most favorable rates, or may be unaware of the most favorable rates. As noted previously, Altruist may earn a “spread” on the rate, such that the rate you receive is worse than the rate Altruist receives

4. Commissions and Other Charges

In the case where a borrower is willing to pay a rebate for the use of your Fully Paid Securities, you will receive a Lending Interest, which will be credited daily, and generally represents a certain percentage of the net rebate received by Altruist for relending your shares. The percentage may be changed by Altruist in its sole discretion. Likewise, the Lending Interest may be varied by agreement between certain customers and Altruist, depending on the size of the customers’ loan portfolios, the types of Fully Paid Securities available in the customers’ accounts, and other factors.

In the case where a borrower is willing to take a rebate for the use of your Fully Paid Securities, you will receive Collateral Interest, which will be accrued daily. The percentage may be changed by Altruist in its sole discretion. Likewise, the Collateral Interest may be changed by agreement between certain customers and Altruist, depending on the size of the customers’ loan portfolios, the types of Fully Paid Securities available in the customers’ accounts, and other factors.

As noted above, Altruist or its affiliates or third parties may also earn a “spread” on the rate, such that the rate you receive will be based on a net fee after deduction for charges by Altruist. Likewise, as noted, Altruist may pay part of the net rebate amount (for shares you lend) to third parties such as introducing broker(s) who may introduce your account to Altruist. These payments may reduce the Lending Interest you receive. You may always terminate your participation in the program if you are unhappy with the amount of Lending Interest or Collateral Interest you are receiving.

XII.     Loans May Be Terminated At Any Time By Altruist

When you lend your Fully Paid Shares, the loan may be terminated and the shares returned to your Altruist account at any time. The loan may be terminated because a party that borrowed the shares from Altruist (after Altruist borrowed them from you) chose to return the shares, or because Altruist received a rerate request and rejected the rerate request, or for other reasons. Altruist also has the right to terminate its borrowing of shares from you even if Altruist continues to lend the same stock through another market. When the loan is terminated, shares will no longer be designated as on loan, you will stop receiving the Lending Interest or Collateral Interest, as applicable, and the collateral will no longer be held for your benefit. You will not have direct control over when to initiate or terminate loans of specific shares. Please note, however, that you can always terminate your participation in the program (which will terminate all of your lending transactions).

XIII.     Selling Your Shares or Borrowing Against Them Will Terminate the Loan Transaction.

If you sell the Fully Paid Shares you have lent out, or if you borrow against the shares (such that the securities become margin securities and are no longer fully paid or excess margin securities), the loan will terminate and you will stop receiving the Lending Interest or Collateral Interest, as applicable.

XIV.     There Is No Guarantee That Your Fully Paid Shares Will Be Loaned Out.

There is no guarantee that you will be able to lend (or that Altruist will want to or be able to borrow) your Fully Paid Shares. There may not be a market to lend your Fully Paid Shares in a particular security at a rate that is advantageous, or Altruist may not have access to a market with willing borrowers. Altruist, or other Altruist customers or Altruist’s affiliates, might have shares that may be loaned out that will satisfy available borrowing interest and, therefore, Altruist may not borrow shares from you. There is no rule or requirement, nor is there anything in the applicable agreements between you and Altruist, that requires Altruist to borrow shares from you or requires Altruist to place your interest in lending shares of a particular security ahead of Altruist’s own interests, or those of other Altruist customers or those of Altruist’s affiliates. Altruist cannot and does not guarantee that all of your Fully Paid Shares that possibly could be loaned out to generate Lending Interest or Collateral Interest will be loaned out.

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