By completing the account application and suitability questionnaire and entering into this Client Services Agreement (this "Agreement") with AlphaClone Inc. (“AlphaClone”), the undersigned ("Client") is engaging AlphaClone to provide investment management services to Client on the following terms:
Client authorizes AlphaClone to open an account (the “Account”) with one of the broker-dealers which AlphaClone has selected to provide brokerage and other services for its Clients' accounts (“Broker”) through which Client will become a participant in AlphaClone’s managed account program. Client hereby appoints AlphaClone as its investment advisor with respect to assets of the Client deposited in, or otherwise delivered to, the Account by Client and AlphaClone accepts such appointment. Client further authorizes AlphaClone to (i) execute and deliver, in Client’s name, the Broker Client Account Agreement (the “Account Agreement”) and such other agreements and documents as AlphaClone may deem necessary or advisable for purposes of opening the Account, and (ii) use Broker to execute any and all transactions for the Account.
A. Subject to the terms and conditions of this Agreement, AlphaClone Inc. shall provide the following investment advisory services to Client:
(i) AlphaClone will supervise and direct the investment and reinvestment of the Account into Securities AlphaClone chooses in a manner that is substantially consistent with the AlphaClone core portfolios selected by Client (collectively, “Investment Strategies”, individually an “Investment Strategy”), taking into account any reasonable restrictions Client has provided to AlphaClone. AlphaClone shall have full discretionary authority, to be exercised in AlphaClone’s exclusive judgment and consistent with the goals and objectives of Client as reflected in the Investment Strategy approved by Client, to supervise and direct the investment and reinvestment of the Account. AlphaClone is authorized to direct the investment of dividends, interest and other income received into the Account in a manner substantially consistent with the Investment Strategy then in effect for the Account. Client understands that sales of Securities may generate taxable gains or losses in the Account.
(ii) For the purposes of this Agreement, “Securities” shall mean all forms of securities and other financial instruments of U.S. and foreign entities, including, without limitation, capital stock, shares of beneficial interest, warrants, partnership interests and similar financial instruments, commodities, currencies, interest rate, currency, commodity, equity and derivative products, including, without limitation, (i) futures contracts (and options thereon) relating to stock indices, currencies, U.S. government securities and securities of non-U.S. governments, other financial instruments and all other commodities, (ii) any derivative or swap, (iii) spot and forward currency transactions, and (iv) agreements relating to or securing such transactions, contract and other claims, executory contracts, participations, mutual funds, money market funds, obligations of the U.S. or a state thereof, and non-U.S. governments and instrumentalities of any of them, commercial paper, certificates of deposit, bankers' acceptances, choses in action, trust receipts, and other obligations and instruments, in each case, of any persons, firms, associations, corporations, partnerships, syndicates, combinations, trusts, organizations, governments, subdivisions thereof or any other entity whatsoever, whether or not publicly tradable or readily marketable.
(iii) The core portfolios selected by Client will be monitored and adjusted quarterly by AlphaClone. The Account’s investments will also be adjusted quarterly so that they substantially track Client’s Investment Strategies.
(iv) Client may impose reasonable restrictions on the management of the Account, including the designation of specific securities or a specific category of securities, that should not be purchased for the Account or that should be sold if held in the Account, and may reasonably modify such restrictions from time to time. AlphaClone reserves the right to decline to accept an Account if it determines, in its sole discretion, that the restrictions imposed by Client are not reasonable. Client understands and acknowledges that any restrictions placed on the management of the Account imposed by the Client or particular requirements of the Account may cause Account performance to deviate from the performance of Client’s chosen core portfolio. Client acknowledges and agrees that where Client restricts a category of Securities that may be purchased for the Account, AlphaClone will determine in its sole discretion the specific Securities in that category.
(v) In furnishing services to Client pursuant to this Agreement, AlphaClone shall rely upon the information provided to it by Client, including the application and suitability questionnaire (collectively, the “Investment Strategy Questionnaire”) and any reasonable investment restrictions or limitations provided by Client. AlphaClone shall be fully protected in relying upon representations of Client regarding said restrictions or limitations.
B. It is Client’s responsibility, and Client hereby affirmatively agrees to undertake such responsibility, to inform AlphaClone in a timely manner of any material change in Client’s financial situation and investment objectives that might affect the manner in which Client’s assets are allocated, and to provide AlphaClone with any information as to Client’s financial status as may reasonably be requested. Client understands and agrees that AlphaClone shall have no liability for Client’s failure to inform AlphaClone in a timely manner of any material change in Client’s financial situation and investment objectives that might affect the manner in which Client’s assets are allocated, or for Client’s failure to provide AlphaClone in a timely manner with any information as to Client’s financial status as may reasonably be requested.
A. General. For AlphaClone's services hereunder, Client agrees to pay AlphaClone an annualized asset-based advisory fee (the “Account Fee”), pursuant to the schedule set forth on Exhibit A which is attached hereto and made a part hereof. The Account Fee will be computed and payable quarterly in advance during the first month of each calendar quarter and shall be calculated based on the closing market value of Account assets held on the last day of the prior quarter, as calculated by the Broker servicing the Account. The Account Fee for the calendar quarter in which assets were first deposited into the Account will be based on the closing market value of the Account assets on the day the assets were deposited in the Account, as calculated by Broker, and prorated for the number of days the Account was open during the quarter. If the Account is terminated prior to the end of a quarter, the fee for that quarter will be prorated for the number of days the Account was open during that quarter and any overpayment, net of Broker’s charges to AlphaClone for the quarter, will be returned to Client following the closing of the Account.
B. Payment of Account Fee. Client authorizes AlphaClone to charge the Account Fee, the Additional Fees (as set forth below) and any expenses incurred by the Account directly to the Account. The Account Fee and the Additional Fees may be changed from time to time upon thirty (30)-days’ notice to Client. The Account Fee will be paid first from any cash available in the Account and next by selling Securities in the Account in a manner AlphaClone, in its sole discretion, determines is as consistent with the Client’s Investment Strategy as feasible. Selling Securities for the payment of the Account Fee will have tax consequences and may result in the imposition of redemption fees.
C. Additional Fees. For wrap fee accounts held at Folio Institutional, the Account Fee covers all advisory, administrative and brokerage services provided by AlphaClone or Broker, but does not include fees for special services not contemplated by this Agreement or the Account Agreement (“Additional Fees”). For separate accounts held at Schwab Institutional, the Account Fee covers all advisory and administrative services provided by AlphaClone, but does not include trading commissions or fees for brokerage or other special services not contemplated by this Agreement or the Account Agreement (“Additional Fees”).
A. The services of AlphaClone hereunder are not to be deemed to be exclusive and AlphaClone and its affiliates shall be free to render services to others, including affiliates. Such services may include furnishing of investment management and advisory services to others who may have investment policies, objectives and strategies which are the same as or similar to those hereunder. AlphaClone will be free, in its sole discretion, to make recommendations to affiliates or others, or effect transactions on behalf of itself or for affiliates or others which may be the same as or different from those recommended to or effected on behalf of the Account. Nothing contained in this Agreement shall prevent AlphaClone or any of its affiliates, acting either as principal or agent on behalf of others, from buying or selling or from recommending to or directing any other account to buy or sell, at any time, Securities of the same kind or class purchased or sold for the Account. It is understood that AlphaClone, its affiliates, and any Related Person (as defined below) may have an interest in a particular transaction or in Securities of the same kind or class as those whose purchase or sale AlphaClone may effect and that AlphaClone may effect Account transactions with affiliates to the extent permitted by law. As used herein, the term “Related Person” means AlphaClone, its affiliates, and their respective officers, partners, directors, shareholders, employees, and agents.
B. Subject to applicable law and regulations, AlphaClone shall not be obligated to undertake any particular investment opportunity which comes to it, and shall be free to allocate any opportunity to purchase Securities to itself, its affiliates and clients of AlphaClone and its affiliates without first offering such opportunities to the Account. AlphaClone shall be entitled to refrain from purchasing or rendering any advice or services concerning Securities of (i) issuers of which AlphaClone, its affiliates or any of their respective Related Persons are directors or officers, (ii) issuers for which AlphaClone or its affiliates act as financial adviser or underwriter, or (iii) issuers about which AlphaClone or any of its affiliates have information which AlphaClone deems confidential or non-public.
A. Broker shall maintain custody of all Account assets. AlphaClone will not retain or physically control any cash, securities or other assets forming any part of the Account. AlphaClone shall use Broker to effect all of Client’s securities transactions. AlphaClone and its representatives will not be responsible for any loss or liability incurred by reason of any action or failure to act on the part of Broker, except to the extent, if any, that such loss or liability is caused by gross negligence or willful misconduct of AlphaClone or its representatives.
B. All Securities held in the Account may be held in the name of any nominee or nominees selected by Folio.
C. Client acknowledges that Client owns the Securities in the Account, and that, to the same extent as if Client owned the Securities outside of the Account, Client retains all indicia of ownership of the securities, including the right to withdraw Securities or cash from the Account, vote securities or delegate voting authority to another person, be provided in a timely manner with a written confirmation or other notification of each Securities transaction, and all other documents required by law to be provided to security holders, and proceed directly as a security holder against the issuer of any Security in the Account and not be obligated to join any person involved in the operation of the AlphaClone wrap fee program, or any other client of the wrap fee program, as a condition precedent to initiating such proceeding.
D. The Account is subject to the terms and conditions of the Account Agreement, including the provisions in such agreement requiring and governing arbitration. Client acknowledges that Client has received a copy of the Account Agreement. Client agrees that Client and the Account are bound by the terms of the Account Agreement.
Broker shall provide Client with account statements, trade confirmations and notifications regarding corporate actions. Client shall receive a statement from Broker, at least quarterly, containing a description of all activity in the Account during the preceding period, including all transactions made on behalf of the Account, all contributions and withdrawals made by Client, all Account Fees and expenses charged to the Account, and the value of the Account at the beginning and end of the period.
A. Minimum Account Size. The minimum initial investment in the Account is $100,000 when Folio Institutional is selected as the Broker and $1,000,000 when Schwab Institutional is selected as the Broker.
B. Additions and Withdrawals.
(i) Client may make additions to or withdrawals from the Account at any time as provided in this Agreement. Except as otherwise provided in the Account Agreement, the initial investment and subsequent additions may be made to Broker by check, wire transfer or other electronic transfer methods.
(ii) Additions to the Account must be at least $500 and will be invested by AlphaClone in accordance with Client’s Investment Strategy.
(iii) Cash added to the Account will automatically be invested in a bank sweep vehicle governed by the terms of the Account Agreement until invested at AlphaClone’s discretion in accordance with Client’s chosen Investment Strategy.
(iv) Withdrawals from the Account shall be made first from cash and next by selling Securities in the Account in a manner AlphaClone, in its sole discretion, determines is as consistent with the Client’s Investment Strategy as feasible. AlphaClone may take up to five (5) days to effect any liquidation of securities held in the Account as a result of a request for withdrawal. Client understands and acknowledges that: (i) withdrawals from the Account generally will have income tax consequences; and (ii) AlphaClone does not provide tax advice. Client should consult a tax professional. Client understands that the Account is designed as a long-term investment vehicle and that withdrawals of assets may impair the achievement of Client’s investment objectives.
All written communication to AlphaClone pursuant to this Agreement will be sent to:
Attn: Account Processing
One Market Street, Steuart Tower, Suite 1208
San Francisco, CA 94105,
All written communication to Client will be sent to the address set forth in Client’s application unless Client directs otherwise in writing.
To the extent that any Account is invested in marketable Securities, Client acknowledges that such investments are not deposits or obligations of and are not guaranteed by AlphaClone or its affiliates and that such investments involve investment risks, including possible loss of principal amount invested.
A. Client shall be responsible for voting all proxies; executing waivers, consents and other instruments; and responding to any plan of reorganization, merger, combination, consolidation, liquidation or similar transaction or plan with respect to any Securities in the Account.
B. AlphaClone shall not be obligated to render any advice or take any action on behalf of Client with respect to Securities held in the Account, or the issuers thereof, which become the subject of any legal proceedings, including bankruptcies and shareholder litigation, to which any Securities or other investments held or previously held in the Account, or the issuers thereof, become subject, nor shall AlphaClone be obligated to initiate or pursue any legal proceedings, including without limitation, shareholder litigation, on behalf of the Account with respect to transactions, Securities held or previously held, in the Account or the issuers thereof. The right to take any actions with respect to any legal proceedings, including, without limitation, bankruptcies and shareholder litigation, and the right to initiate or pursue any legal proceedings, including, without limitation, shareholder litigation, with respect to transactions, Securities or other investments held in the Account is expressly reserved to Client.
C. Broker shall deliver to Client all shareholder communications, including proxy statements and proxies, distributed by the issuers of Securities held in the Account.
A. This Agreement may be terminated by either party upon at least 15 days’ prior written notice to the other party. Termination of this Agreement will not affect the obligations of Client to pay fees due hereunder, which shall be pro rated through the date of termination.
B. The provisions of the Indemnification, Limitation of Liability, and Governing Law Sections of this Agreement shall survive the termination of this Agreement.
AlphaClone shall use its best judgment and efforts in performing the services provided for in this Agreement, but, to the fullest extent permitted by law, neither AlphaClone nor any Related Person shall be liable for any loss sustained by Client by reason of the adoption of any Investment Strategy or due to any error in judgment or omission or the purchase, sale, redemption or retention of any Security or instrument.
Client shall indemnify and hold harmless AlphaClone and its affiliates and each of their respective directors, managers, members, officers, employees and agents from and against any loss, expense, damage or injury suffered or sustained, including reasonable attorney's fees and expenses, arising out of Client's breach of any agreement, representation or warranty contained in this Agreement.
No term or provision of this Agreement may be amended, modified or waived except in writing executed by the party against whom such amendment, modification or waiver is to be enforced; provided that AlphaClone may unilaterally amend the fee schedule set forth below and the Additional Fees effective upon thirty (30) days’ written notice to Client of such amendment.
This Agreement will bind and be for the benefit of the parties hereto and their successors and permitted assigns, except that this Agreement may not be assigned (within the meaning of the Advisers Act of 1940, as amended (the “Advisers Act”)) by either party without the consent of the other party.
The parties represent and warrant to each other as follows: A. Client represents and warrants that: (i) Client has full power and authority to open this Account and to exercise control over the assets in the Account; (ii) the terms of this Agreement do not violate any obligations by which Client is bound, whether arising by contract, operation of law or otherwise; and (iii) if Client is a corporation, partnership, or other legal entity: (1) this Agreement has been authorized by all appropriate action and Client will be bound by its terms when the Agreement is executed and delivered, and (2) Client will deliver to AlphaClone evidence of such authority as AlphaClone may reasonably require, whether by way of certified resolution or otherwise. Client has provided information sufficient to identify Client in order for AlphaClone to make a good faith effort to comply with the “know your customer” provisions of the Bank Secrecy Act, the USA PATRIOT Act and other applicable laws and regulations.
B. AlphaClone represents and warrants that AlphaClone is registered as an investment adviser under the Investment Advisers Act.
Asset-based fee arrangements and investment advisory accounts may not themselves be suitable for any given client. Suitability depends on a number of factors, including but not limited to the size of a client’s account, the client’s particular financial needs, circumstances and investment objectives, and the fees charged for the services. Client may be able to obtain some or all of the types of services available through AlphaClone on an “unbundled” basis through AlphaClone or other firms, and, depending on the circumstances, the aggregate of any separately paid fees may be higher or lower than the Account Fee and/or Additional Fees. AlphaClone’s may be higher or lower than the fees charged by other firms for services that are similar to those provided by AlphaClone.
This Agreement shall be governed by and construed in accordance with the laws of the State of California. All disputes arising out of or relating to these Terms shall be finally resolved by arbitration conducted in San Francisco, California, U.S.A. under the commercial arbitration rules of the American Arbitration Association. The parties shall appoint as sole arbitrator a retired judge who presided in the State of California. The parties shall bear equally the cost of the arbitration (except that the prevailing party shall be entitled to an award of reasonable attorneys’ fees incurred in connection with the arbitration in such an amount as may be determined by the arbitrator). All decisions of the arbitrator shall be final and binding on both parties and enforceable in any court of competent jurisdiction. Notwithstanding this, application may be made to any court for a judicial acceptance of the award or order of enforcement. Notwithstanding the foregoing, AlphaClone shall be entitled to seek injunctive relief, security, or other equitable remedies from the United States District Court for the Northern District of California or any other court of competent jurisdiction.
This Agreement represents the entire agreement between Client and AlphaClone with respect to the subject matter hereof, and all prior agreements, understandings, and negotiations are merged herein and superseded hereby.
AlphaClone shall not be required to furnish any bond to secure its faithful performance under this Agreement. War, natural disasters, government restrictions, trading halts, exchange or market rulings, extraordinary market volatility or exchange conditions or any other conditions beyond AlphaClone’s control may prevent AlphaClone from fully performing the services described in this Agreement.
Client hereby acknowledges and agrees to the following:
A. Client acknowledges receipt of Part II of AlphaClone’s Form ADV and “Brochure” meeting the requirements of Rule 204 3. Client shall receive updated copies of such Form ADV Part II as required by applicable law and regulations. Client understands that it may close Client’s account with AlphaClone within five (5) days of opening the account without penalty imposed or management fee charged by AlphaClone. Any losses due to market activity during that five (5) day period will be Client’s responsibility. To the extent client was introduced to AlphaClone by a paid solicitor, Client acknowledges that it also received such solicitor’s disclosure document as required by Rule 206(4) 3 of the Advisers Act;
B. The Investment Strategy selected by the Client, as well as the Securities held in the Account, present certain risks to the Account, including the risk of loss of the principal value of the Account due to general market risks, variations in market interest rates, and the performance of different asset classes, Securities, and investment styles, all of which affect the Account’s overall performance.
C. AlphaClone does not and cannot guarantee (i) the performance of any Security, AlphaClone core portfolio, Investment Strategy or the Account; (ii) any specific level of return or yield in the Account; or (iii) the success of AlphaClone’s overall advisory services with respect to the Account. Past performance is not a guarantee of future results.
D. AlphaClone (i) is not warranting to Client that the assets in the Account will increase in value or retain their value; (ii) will have no liability whatsoever for any advice given to Client in good faith; and (iii) will not be liable for any taxable event which may occur or which may not occur as a result of a Securities transaction effected or omitted;
E. AlphaClone may give advice and take action in the performance of its duties for its client accounts that may differ from advice given, or the timing and nature of action taken, with respect to the Account, even if the other accounts are similar to Client’s; and
F. AlphaClone may effect transactions with respect to Securities of issuers of which it, its officers, directors, employees, or affiliates may (i) be directors or officers; or (ii) own Securities or otherwise have a financial interest, and AlphaClone’s disclosure of these facts and relationships does not imply that any of AlphaClone’s recommendations are based upon possession of any material undisclosed information relating to any such Security or Securities.
G. The information forming the basis of recommendations and decisions with respect to the investment management services provided hereunder will be derived from sources which AlphaClone believes are reliable, but that the accuracy of information obtained cannot be guaranteed, and such information may or may have not been independently verified by AlphaClone or persons acting on its behalf; and
H. AlphaClone’s recommendations will be based on the Investment Strategy Questionnaire and other information that Client provides to AlphaClone, and Client represents and warrants that such information is complete and accurate.
MANAGED ACCOUNT FEES
WRAP FEE PROGRAM ACCOUNTS HELD AT FOLIO INVESTMENTS
|Assets under Management||Annual Fee|
|Next $250,001 to $500,000||1.35%|
|Next $500,001 to $1,000,000||1.15%|
SEPARATE ACCOUNTS AT CHARLES SCHWAB INSTITUTIONAL
|Assets under Management||Annual Fee|
|$1 - $25 million||1.00%|
|$25 - $50 million||0.90%|
|$50 - $75 million||0.80%|
|Over $100 million||0.60%|
For purposes of the above fee schedule, the value of “Assets under Management” is the closing market value of all holdings in the Account, as calculated by the Broker.
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