Investment Advisory Agreement
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT (this “Agreement”) is made as of the date you (“Client”) assent to the terms as described herein, by and between Client and Emcee Invest, Inc. (“Emcee”), a Delaware corporation, doing business as Bits of Stock (“Bits”), (collectively, the “Adviser”).
WHEREAS, the Adviser is an investment adviser registered as such pursuant to Rule 203A-2(e) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”);
WHEREAS, the Client wishes to retain the Adviser to provide certain non-discretionary investment-advisory services pursuant to the terms of this Agreement;
WHEREAS, the Adviser offers its non-discretionary investment-advisory services through a web-based program that provides clients who make purchases with participating third parties an opportunity to generate cash-back rewards, which may then be used by the Adviser, at the sole direction of the Client, to purchase fractional shares of single name stocks for the Client’s account (the “Program”); and
WHEREAS, the parties hereto wish to set forth the terms and conditions upon which the Adviser shall provide such non-discretionary investment advice to Client.
NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, with the intent to be legally bound, hereby agree as follows:
1. Services and Scope of Authority.
(a) Subject to the terms and conditions set forth in this Agreement, Client hereby appoints the Adviser to provide certain non-discretionary investment advice through its Program, and the Adviser hereby accepts such appointment. Upon acceptance of this Agreement by the Client, the Client shall answer a series of questions, through an interactive questionnaire, designed to elicit the Client’s risk profile (e.g., annual income, net worth, investment experience, age, risk tolerance, investment objectives, etc.). Based on the Client’s risk profile, the Adviser shall make available, through the Program, certain publicly traded securities, including single name stocks and exchange traded funds (“ETFs”), that would be suitable for the Client based on the Client’s financial situation and investment objectives. After the Client makes certain qualifying purchases with participating third parties that generate cash-back rewards, the Adviser may purchase for the Client, solely at the Client’s direction, certain stocks that have been deemed suitable by the Adviser in accordance with the Client’s risk profile. For the avoidance of doubt, the Adviser will not have any authority to manage the Client’s assets on a discretionary basis, and the Adviser will not make any trades on behalf of the Client without express direction to do so by the Client. The Adviser may provide the Program through the Bits mobile application, or by utilizing application programming interface to host the Program on third-party applications. For more details on the Program, the Client should review Part 2A of the Adviser’s Form ADV.
(b) The Adviser is hereby granted a limited power of attorney on behalf of the Client to take any actions pertaining to (a) orders for the purchase, sale and exchange of securities in the Client’s account, and (b) any other instructions relating to the confirmation, delivery and settlement of securities transactions on behalf of the Client, which the Adviser considers necessary or advisable in order to carry out its trading on behalf of the Client.
2. Fees and Expenses. The parties hereto agree to the following:
(a) The Adviser will not charge a fee to the Client for any non-discretionary investment advisory services provided pursuant to this Agreement.
(b) The Adviser partners with, and is compensated by, various third parties (including, but not limited to, merchants and banking institutions) who assist with the facilitation of the Program. Adviser may use the proceeds from these contractual relationships to purchase fractional shares of securities on behalf of the Client at the Client’s direction.
(c) The Program will include all trade charges applicable to an account, and thus, the Client will not be liable to the Adviser for any expenses (with the exception of a potential $1.00 automated clearing house fee for withdrawing funds and transferring rewards as cash to Client’s bank account), that are not otherwise explicitly referenced herein. However, Client may incur certain charges imposed by custodians and other third parties. These include transfer fees, administrative fees and other fees and taxes on brokerage accounts and securities transactions. The issuer of certain securities or products purchased for the Client by the Adviser, may charge product fees that affect the Client. The Adviser shall not benefit, directly or indirectly, from any third-party fees referenced in this Section. The Client should review all pertinent documents to fully understand the total amount of fees they may incur.
(d) The Adviser shall be responsible for all internal operating expenses of the Adviser, including, without limitation, rent, utilities, and employee salaries.
3. Custody. The Adviser shall not have custody of the Client’s assets, and the Adviser shall have no authority hereunder to take or have possession of any of the Client’s assets or to direct delivery of any securities or payment of any funds held by the Client. The Client agrees that assets held pursuant to this Agreement shall at all times be held by a broker-dealer (the “Custodian”). The Custodian will be registered as a broker-dealer pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Client authorizes the Adviser to give instructions to the Custodian with respect to all investment decisions regarding assets managed pursuant to this Agreement and the Client hereby authorizes the Custodian to effect transactions, deliver securities, and otherwise take such actions as the Adviser shall direct in connection with the performance of the Adviser’s obligations under this Agreement. The Client acknowledges and agrees that the Adviser may aggregate orders for the Client’s account with orders for the same security for other Client accounts where such aggregation is feasible. Client understands and acknowledges that the Adviser is under no obligation to either aggregate orders or avoid aggregating orders, and may do either in the Adviser’s sole discretion. The Client acknowledges that the Adviser shall not have custody of the Client’s assets, and any revenue received by the Adviser shall be the Adviser’s revenue, and not the Clients.
(a) The parties hereto agree that the Client shall establish all necessary accounts and execute all necessary account documentation as may be required by the Custodian and the Adviser from time to time. The Client acknowledges that the use of the Custodian may result in certain costs or disadvantages to the Client, including higher brokerage commissions, the Adviser’s inability to negotiate commissions on behalf of the Client, and the Adviser’s inability to negotiate volume commission discounts on batched transactions. The Client acknowledges that the Adviser may have a potential conflict between the Client’s interest in obtaining best execution and the Adviser’s receiving future referrals from the Custodian. The Client further acknowledges and understands that commission rates paid by the Client to the Custodian may be higher than (i) commission rates paid by clients of Adviser that do not direct Adviser to place all trades with Custodian and (ii) institutional investor customers of Adviser.
(b) If the Adviser determines that the Custodian is unable or unsuitable to execute a trade, the Client hereby authorizes the Adviser to utilize broker-dealers other than the Custodian to execute the trade, and grants the Adviser discretion to select broker- dealers for the purpose of executing securities transactions for the Client’s account. To the extent the Adviser has discretion in the selection of brokers, the Adviser has a duty to seek “best execution” for its Clients’ securities transactions. To fulfill this obligation, the Adviser generally must execute securities transactions in such a manner that the Client’s total cost or proceeds in each transaction is the most favorable under the circumstances. In selecting brokers to execute such transactions for the Client’s account, the Adviser need not solicit competitive bids and shall not have an obligation to seek the lowest available commission cost; the Client simply must not pay a rate of commissions in excess of what is competitively available from comparable brokerage firms for comparable services, taking into account various factors, including commission rates, financial responsibility, and ability of the broker to efficiently execute transactions.
(c) The Adviser may receive from the Custodian or other broker-dealers, without cost and/or at a discount, certain services and/or products, to assist in monitoring and servicing the Client’s accounts. These may include investment-related research, pricing information and market data, software and other technology that provide access to Client account data, compliance and/or practice management-related publications, discounted or free consulting services, discounted or free attendance at conferences, meetings, and other educational or social events, marketing support, computer hardware or software, and other products used by the Adviser to assist the Adviser in its investment advisory business operations. The Adviser may accept research and related services falling within the safe harbor established by Section 28(e) of the Exchange Act.
5. Liability and Indemnification.
(a) The Adviser will use its best efforts in its implementation of the Program, and as such, the Client agrees that none of the Adviser or any of its officers, directors, members, principals, managers, employees, agents or affiliates (each, an “Adviser Party”) shall be liable to the Client for any expense, loss, cost, damages, claim, liability (including, without limitation, any fines, amounts paid or to be paid in settlement and reasonable attorney’s fees and expenses) (collectively referred to as “Losses”) suffered or incurred by reason of, or arising from, or in connection with, the operations, business or affairs of this Agreement or the Client’s business or affairs except to the extent that any such Losses are caused by any Adviser Party’s gross negligence, bad faith, willful misconduct, fraud or violation of applicable laws or regulations.
(b) The Adviser shall not be liable to the Client for breach of fiduciary duties for its good faith reliance on the provisions of this Agreement to the fullest extent permitted by applicable law. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of the Adviser otherwise existing at law or in equity, are agreed by the Client to modify to that extent such other duties and liabilities of the Adviser.
(c) The Adviser shall not be liable for any Losses incurred by reason of any act or omission of any broker or custodian, or any other service provider that was chosen by the Adviser, the Custodian, or any other person acting on the Client’s behalf, with reasonable care and in good faith.
(d) The Client shall, upon request of the Adviser and to the fullest extent permitted by law, indemnify, defend and save harmless each Adviser Party against any Losses suffered or incurred by reason of, or arising from, or in connection with, the operations, business or affairs of this Agreement except to the extent that any such Losses are caused by any Adviser Party’s gross negligence, bad faith, willful misconduct, fraud or violation of applicable laws or regulations. The foregoing agreement of indemnity shall be to the extent permitted under applicable laws or regulations and shall be in addition to, and shall in no respect limit or restrict, any other remedies which may be available to an Adviser Party.
(e) Notwithstanding the above provisions of this Section, federal and state securities laws, as well as other applicable law, may impose liability under certain circumstances on persons who act in good faith. Therefore, nothing herein shall in any way constitute a waiver or limitation of any rights that the Client may have under federal or state securities laws or other applicable law.
6. Services to Other Clients. The Adviser, its officers, directors, members, principals, managers, employees, agents or affiliates, may have or take the same or similar positions in specific investments for the accounts of other clients, as the Adviser does for the Client. The Client expressly acknowledges and understands that the Adviser shall be free to render investment advice to others and that the Adviser does not make its investment management services available exclusively to the Client. Nothing in this Agreement shall impose upon the Adviser any obligation to purchase or sell, or to recommend for purchase or sale, for the Client any security which the Adviser, or its officers, directors, members, principals, managers, employees, agents or affiliates, may purchase or sell for their own accounts or for the account of any other client, if, in the reasonable opinion of the Adviser, such investment would be unsuitable for the Client or if the Adviser determines in the best interest of the Client it would be impractical or undesirable.
7. Representations and Warranties.
(a) Each party represents and warrants to the other that (i) it has the requisite legal capacity and authority to execute, deliver and perform its obligations under this Agreement; (ii) it has duly authorized, executed and delivered this Agreement and this Agreement is legal, valid, binding and enforceable in accordance with its terms; (iii) its execution of this Agreement and the performance of its obligations hereunder do not conflict with or violate any provisions of its governing documents (if any) or any obligations by which it is bound, whether arising by contract, operation of law or otherwise; and, (iv) it will deliver to the other party evidence of its authority and compliance with its governing documents on request.
(b) The Adviser is a registered investment adviser pursuant to Rule 203A-2(e) under the Advisers Act, and as such, provides non-discretionary investment advisory services solely through an interactive, digital platform (e.g., a website and/or mobile application).
(c) Notwithstanding anything to the contrary contained in this Agreement, the Client expressly acknowledges that its investment pursuant to this Agreement involves a high degree of risk, including the risk that the Client could suffer a substantial or complete loss of its investment.
(d) The Client understands the tax implications to the Client of the actions contemplated by this Agreement, has consulted its own tax advisers regarding such tax implications, and is not relying on the Adviser for any advice or information about such tax implications.
(e) The rules and regulations administered by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) prohibit, among other things, the engagement in transactions with, and the provision of services to, certain countries, territories, entities and individuals. The lists of OFAC prohibited countries, territories, entities and individuals can be found on the OFAC website at http://www.treas.gov/offices/enforcement/ofac. In addition, the programs administered by OFAC prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists. Accordingly, the Client represents and warrants that, to the best of its knowledge, after due inquiry, none of: (A) the Client; (B) any individual or entity (sometimes referred to herein as a “Person”) controlling or controlled by the Client; or (C) any Person having a beneficial interest in the Client, is a country, territory, individual or entity named on any OFAC list, or is a Person prohibited under any programs administered by OFAC.
(g) The Client represents and warrants that, if at any time during the term of this Agreement, the information provided during the Client’s initial onboarding becomes materially inaccurate, including, but not limited to, the Client’s responses to the questionnaire, the Client will promptly notify the Adviser and provide correct information. The Client understands and acknowledges that correct information is critical for the Adviser in its efforts to provide the Program to the Client.
(h) The Client understands and acknowledges that the Client must link their credit card and/or bank account information (“Payment Methods”) with their account, and such information must be shared with third-party monitoring services to enable the Adviser to provide the Program to the Client. The Client authorizes the Adviser and its affiliates, through the use of a third-party monitoring service, to monitor the transactions of the Payment Methods, to allow the Adviser to identify any qualifying purchases made with participating merchants for which cash-back rewards may be earned, which may then be used by the Adviser, at the direction of the Client, to purchase single name stocks and ETFs. The Client also authorizes the Adviser and its affiliates to view the Client’s historical transaction data of their Payment Methods to enable the Adviser to identify personalized and targeted offers that may be of interest to the Client, and which may be offered to the Client as part of the Program.
(i) If at any time during the term of this Agreement any of the foregoing representations and warranties shall cease to be true and correct in all respects, the party to whom such representations and/or warranties apply shall immediately provide notice to the other party.
8. Term. The term of this Agreement shall be effective on and from the date the Client assents to the terms hereto by clicking “Accept and Continue.” The Client or Adviser may terminate this Agreement upon not less than thirty (30) days’ prior written notice. Though the Adviser does not charge any fees, the Client may still incur other fees, including, but not limited to, with the Custodian, upon closing their brokerage account and terminating this Agreement. Notwithstanding the foregoing, the Adviser reserves the right to terminate this Agreement immediately and without notice to the Client if the Client is not active on the Program for a three (3) month period.
9. Confidentiality. Each party hereto shall treat all information (including, without limitation, all information concerning this Agreement, the identity of the Client, the trading activities of the Client, etc.) furnished hereunder by the other as confidential and shall not disclose such information to third parties except (i) with the written consent of the other party; (ii) as required by law or by demand of any regulatory or self-regulatory authority (in which case the party subject to such demand shall promptly, unless impracticable under the circumstances or unless prohibited by law, notify the other party of such required disclosure so as to allow such party, at its own expense, to seek to limit or quash such disclosure); or (iii) to the parties’ respective auditors and professional and legal advisors when reasonable necessary for the performance of their services. Notwithstanding the foregoing, either party may disclose to any person any matters regarding the tax treatment and tax structure of the Client’s account, or any investments held in the Client’s account, or to the extent otherwise necessary to comply with any applicable laws or regulations.
10. Binding Arbitration.
(a) The Adviser and the Client agree that any claim, controversy or dispute between them arising out of or relating to this Agreement, including any controversy or claim as to its arbitrability or rescission, or the investment advisory services provided by the Adviser to the Client, the termination of this Agreement, or any matter relating to the foregoing shall be submitted to and settled by arbitration in the forum of the American Arbitration Association (“AAA”) located in New York County in the State of New York and conducted in accordance with the Commercial Arbitration Rules of the AAA and the Federal Arbitration Act, except as follows: (i) each arbitrator shall agree to treat as confidential evidence and other information presented by the parties to the same extent as the confidentiality provisions of this Agreement, and (ii) the arbitrators shall have no authority to amend or modify any of the terms of this Agreement. If the AAA is not then in existence, the arbitration shall be governed by the Commercial Arbitration Rules in effect on the date of this Agreement as indicated on page one hereof. The arbitrators shall not have a personal or financial interest in the result of the arbitration. Each of the Adviser and Client shall select an arbitrator, and each arbitrator so selected shall jointly select a third arbitrator. The panel of three arbitrators so selected shall together arbitrate the dispute between the parties. The arbitrators shall interpret this Agreement pursuant to the laws of the State of New York and shall base any decision or award on applicable law and judicial precedent. Any arbitration award shall be final and binding upon the parties, and any court, state or federal, having jurisdiction may enter a judgment on the award. The arbitrators shall not, under any circumstances, have any authority to award punitive or exemplary damages.
(b) If either party chooses arbitration, neither party shall have the right to litigate such claim in court or to have a jury trial, except either party may bring its claim in its local small claims court, if permitted by that small claims court’s rules and if within such court’s jurisdiction.
(c) The successful party in any arbitration brought pursuant to this Agreement shall be entitled to recover its reasonable legal fees and expenses (including, without limitation, expert witness fees and expenses and travel expenses for the successful party and its witnesses) from the unsuccessful party and the award of legal fees and expenses in accordance herewith shall be part of any arbitration decision.
(d) The decision of the arbitrators shall be in writing and shall set forth in reasonable detail the basis of the decision. The decision or award of the arbitrators shall be Final, Binding and Enforceable. “Final, Binding and Enforceable” shall mean that the relevant determinations and decision shall have the same preclusive effect for all purposes as if such determinations and decision had been embodied in a final judgment, no longer subject to appeal, entered by a court of competent jurisdiction, and any party may petition a court having jurisdiction over the parties and subject matter to reduce such decision to judgment.
11. Class Action Waiver. The Client agrees that any arbitration or proceeding shall be limited to the dispute between the Adviser and the Client individually. To the full extent permitted by law, (i) no arbitration or proceeding shall be joined with any other; (ii) there is no right or authority for any dispute to be arbitrated or resolved on a class action-basis or to utilize class action procedures; and (iii) there is no right or authority for any dispute to be brought in a purported representative capacity on behalf of the general public or any other persons. THE CLIENT AGREES THAT IT MAY BRING CLAIMS AGAINST THE ADVISER ONLY IN ITS INDIVIDUAL CAPACITY AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING.
12. Assignment. This Agreement may not be assigned by the Client or the Adviser without the prior written consent of the other party.
13. Third-Party Beneficiary. Neither party intends for this Agreement to benefit any third party not expressly contemplated in this Agreement.
14. Independent Contractor. The Adviser is and will hereafter act as an independent contractor and not as an employee of the Client, and nothing in this Agreement may be interpreted or construed to create any employment, partnership, joint venture or other relationship between the Adviser and the Client.
15. Access to Information. The Adviser will provide the Client with continuous access to the Program regarding information about the Client’s account (e.g., transactions, securities, balances, etc.). The Custodian will prepare account statements and account balances during the prior quarter. All information relating to the Client’s account will be provided in the Program. The Adviser shall retain, for a period of at least five (5) years, plus the current year, or longer as required by any applicable law, such books, records and statements, as may be necessary to give the Client a complete record of all transactions carried out by the Adviser on behalf of the Client, and such other books, records and statements as may be required by applicable law.
16. Notice. All notices under this Agreement shall be in writing and shall be deemed effective upon delivery by electronic mail (e-mail) or personally, if delivered by courier, or if mailed by registered mail, postage prepaid, to the address of the party to be accorded notice as set forth herein or such other address as such party last provided to the other by written notice.
17. Electronic Delivery. The Client agrees and provides its consent to have the Adviser electronically deliver all communications related to the Client’s account. These communications may include current and future information exchanged under this Agreement, including, but not limited to, information required to be submitted by the Adviser to the Client, such as notices (including privacy notices); letters to investors; regulatory communications, including the Adviser’s Part 2A of its Form ADV; and other information, documents, data, and records regarding the Client’s investment with the Adviser.
18. Amendment and Waiver. This Agreement may be amended by the Adviser with Client’s acknowledgment. For the avoidance of doubt, the Client may signal its acknowledgment by clicking in the Program or another application. Under no circumstances will oral statements be considered part of this Agreement or otherwise be deemed legally binding. The Adviser and the Client may, by written consent, waive, either prospectively or retrospectively, and either for a specified period of time or indefinitely, the operation or effect of any provision of this Agreement. No waiver of any right by any party hereto shall be construed as a waiver of the same or any other right at any other time. Further, no failure or delay on the party of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy, preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
19. Governing Law. The Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of New York (excluding the law thereof which requires the application of or reference to the law of any other jurisdiction).
20. Severability. If any term or provision of this Agreement is deemed invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.
21. Survivability. The provisions of this Agreement shall survive the termination of this Agreement with respect to any events occurring or matter arising during the term of this Agreement.
22. Entire Agreement. This Agreement constitutes the entire understanding of the parties concerning the subject matter hereof, and supersedes all prior agreements and understandings, oral or written, between them regarding such subject matter.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and delivered on its behalf by its duly authorized representative, as of the date Client clicks “Accept and Continue”.