Account Relationship Disclosure

Last updated: November 24, 2022

1. Introduction and purpose

   Welcome to Flahmingo Investments Inc. (“Flahmingo“, “we“, or “us“).

   Flahmingo is registered as a restricted dealer in Alberta, subject to specific terms and conditions contained in the exemptive relief decision Re Flahmingo Investments Inc., dated June 15, 2022, which permits Flahmingo to operate its investment platform on which Alberta residents can buy, sell and hold US traded stocks on a full or fractional basis. As such, Flahmingo may not be subject to all of the requirements otherwise applicable to an investment dealer and a member of the Investment Industry Regulatory Organization of Canada (IIROC), including those that apply to marketplaces and to trading on marketplaces, until such time as it becomes a member of IIROC. Our principal regulator is the Alberta Securities Commission (ASC).

   Flahmingo offers easy to use portfolio building apps, fractional shares, automated functionality, educational resources, and mobile access to the Flahmingo app.

   Please review the information provided in this Account Relationship Disclosure (ARD) document. The purpose of this ARD is to provide you with a good understanding of the services you will receive when you open an account at Flahmingo. It contains important details about the services we offer, the features of your account and how it operates, and our responsibilities to you.

   Should there be material changes impacting this ARD, we will let you know.

   If you have any questions or if we can be of assistance in any way, please contact us at www.flahmingo.com.

2. Description of the client accounts and products and services offered

   Products

   Flahmingo offers permitted account holders access to Tax-Free Savings Accounts (TFSA) which can be used to purchase, hold and trade certain U.S. equities that are not dually listed on a Canadian exchange (e.g. stocks and Exchange-Traded Funds (ETFs)).

   Generally, the investment products available on our trading platform will be able to be readily liquidated or resold.

   In the event that one or more of the securities held in your TFSA are no longer offered (delisted securities), you will not be able to trade in the securities and this will be noted on your account statement

   For more information on investment products, you can read the investment explanations in the Investments at a Glance, a booklet prepared by the Canadian Securities Administrators (CSA) for financial consumers. It’s available on the CSA website at www.securities-administrators.ca.

   Services

   Flahmingo provides order-execution service accounts on U.S. equities that are not dually listed on Canadian exchanges. We engage the execution services of Alpaca Securities LLC (“Alpaca“), a broker/dealer registered in the United States for U.S. listed equities and options, for all equity trades (see the description below). In executing your trades, Alpaca may receive payment for order flows from third-party brokers. This is described in more detail in Flahmingo‘s Conflict of Interest Statement.

   You can enter orders using our online trading platform through the Flahmingo app. Using our accounts, you can create one or more self-directed portfolios which can be populated with full or fractional shares of individual stocks and ETFs. You can also trade your selected full or fractional shares of stocks and ETFs on a real-time basis. As beneficial owners of full or fractional shares of individual stocks and ETFs, you still have the right to receive dividends (if issued) and the ability to exercise voting rights in proportion to your interest in the fractional shares and ETFs. You must first convert currency into U.S. dollars prior to commencing trading on the Flahmingo app. Flahmingo may utilize its own cash or engage a foreign exchange provider for the purpose of currency conversion.

   Flahmingo utilizes a third-party service provider to facilitate voting rights. When you vote your interest in a fractional share, the fractional position voted by you is added to the aggregate vote total for all shares of such security to the applicable vote tabulator for the meeting or shareholder event. Neither Flahmingo nor its third party service provider are affiliated with any tabulators. Each tabulator may follow differing policies for counting fractional share positions submitted to it for a meeting or shareholder event, and it is therefore possible that a tabulator may discard fractional positions submitted to it or follow rounding practices, such as rounding down to the nearest whole share, that have the effect of excluding some fractional positions submitted to them from the total number of shares voted.

   We provide you with tools and resources to help you make informed investment decisions. We do not provide financial, legal, tax, or investment advice or any investment recommendations. You are responsible for your own investment decisions.

   We will consider whether an account with Flahmingo will be appropriate for you, based on certain information you provide us in your account application. If you have any concerns about whether a Flahmingo account is right for you, please contact a Flahmingo representative.

   Currency conversion

   Flahmingo is authorized to exchange Canadian dollars to U.S. dollars and from U.S. dollars to Canadian dollars for clients’ accounts utilizing Flahmingo’s cash or through a foreign exchange provider (banking institution or other sophisticated institutions) in accordance with the clients’ instructions.

   Who executes your trades

   When you open an account with Flahmingo to purchase or hold securities, you enter into a contract with Flahmingo that provides you with the right to buy, sell, and hold securities in fractional quantities. You will not directly enter into a contract to purchase or sell securities on your account with Flahmingo’s executing broker, Alpaca Securities LLC (Alpaca).

   Alpaca receives revenue from third party liquidity providers based on the order flow execution received at each venue. While rebate rates are substantially similar amongst the liquidity providers, they may vary based on order characteristics (such as price of execution, marketability, and other characteristics). Alpaca does not negotiate with venues over rates as a condition of a venue receiving its order flow. As described in Flahmingo‘s Conflict of Interest Statement, there is a potential conflict inherent to a market maker both paying for order flow and providing price improvement, as the potential source of funds for each is the same, namely the anticipated profit the market maker seeks to earn from executing or facilitating the execution of client orders. Accordingly, from such anticipated profit, a market maker can (i) forgo a portion of such anticipated profit to provide price improvement; (ii) forgo a portion of such anticipated profit to pay for order flow; or (iii) retain a larger portion of anticipated profit and not provide (or provide less) price improvement or not provide (or provide less) payment for order flow.

   Payment for Order Flow and Order Routing Information

   Pursuant to the U.S. Securities and Exchange Commission (SEC) Rule 606, firms are required to make publicly available a quarterly report with regard to their routing of non-directed orders. Additionally, pursuant to SEC Rule 607, firms are required to disclose, upon opening a new client account and on an annual basis thereafter: (a) their policies regarding payment for order flow, including a statement as to whether any payment for order flow is received for routing client orders and a detailed description of the nature of the compensation received; and (b) their policies for determining, in the absence of specific client instructions, where to route client orders that are the subject of payment for order flow, including a description of the extent to which orders can be executed at prices superior to the National Best Bid/Offer. For the purpose of these Rules, we have entered into an agreement with Alpaca to route orders on behalf of Flahmingo. Alpaca’s disclosures regarding order flow and order routing can be accessed by utilizing the following link: https://alpaca.markets/disclosures.

   Who holds your cash

   In order to purchase or sell securities with your Flahmingo account, you must deposit funds in your account prior to making a trade. Flahmingo will not hold cash on your behalf. Your uninvested cash balance will be held in trust by The Royal Trust Company (RBC Trust), a federally regulated financial institution by the Office of the Superintendent of Financial Institutions. In the course of Flahmingo’s business, Flahmingo will temporarily use its commercial bank accounts to handle your funds and will have the authority to handle cash held in trust by RBC Trust on your behalf. There may be a risk in permitting Flahmingo to access your cash, in the event that cash could be accessed improperly and misused. Access to your cash is only permitted to settle buy transactions and foreign currency transactions initiated by you.

   Who holds your securities

   Flahmingo does not directly hold any securities for you. Instead, all transactions in securities are settled through Depository Trust & Clearing Corporation (DTCC) and are held on your behalf by Flahmingo’s executing broker, Alpaca acting as its agent for full shares and as principal for fractional shares. Alpaca works with various third parties, including Velox Clearing LLC for securities transfers and custody of client securities. Alpaca through an omnibus arrangement with Velox Clearing LLC custodies client securities at DTCC. Securities and other assets are held in the United States.

   Limits on products and services offered

   You will be subject to a limit of $30,000 per year that can be deposited into the account and used for trading (trading limit). The number of securities you can hold is limited to 1,000 securities. Trading limits may be amended from time to time and are available on our website at www.flahmingo.com.

   You will not be permitted to enter into contracts that involve the use of leverage using the securities in your Flahmingo account. Securities owned by you may not be pledged, re-hypothecated, or otherwise used in the business of Flahmingo or its affiliates.

3. Fees and other compensation disclosure

   The fees you pay are set out in the Flahmingo Fee Schedule provided to you at the time of account opening. This information is also available on our website at: www.flahmingo.com.

   The cost of currency conversion fees, withholding taxes, and other fees and expenses charged within your account can impact the performance of your portfolio. When considering the fees charged to your account, you should note that a fee charged to your account will compound over time as a deduction to the overall value of your account. Every dollar taken out of your account to cover fees is one less dollar left to invest in your account to compound and grow over time.

   Trading Commission and Fees

   Flahmingo does not charge clients commission or other fees on trades. Flahmingo will be responsible for settling all fees for trading on exchanges.

   Currency Conversion Fees

   Flahmingo charges clients 2.5% as a foreign currency conversion fee. Currency conversion fees in the form of spreads are charged to your account when converting from Canadian dollars into U.S. dollars, and from U.S. dollars into Canadian dollars. The foreign currency conversion rate and Flahmingo‘s spread will depend on market fluctuations as well as the amount, date, and type of foreign currency transaction. Foreign currency conversions take place at such rates as are available to our retail clients for currency conversions of a similar amount, date, and type. In performing foreign currency transactions, Flahmingo may act as an agent or principal. Flahmingo may, at its discretion, reject a foreign currency transaction request. Flahmingo converts from Canadian dollars into U.S. dollars and from U.S. dollars into Canadian dollars on the day that it carries out the currency conversion, however, Flahmingo may at its discretion use a different day for transactions that may be agreed upon with you, or other transactions that Flahmingo deems necessary, at the rate specified in the Flahmingo Fee Schedule, as amended from time to time.

   Uninvested Cash

   Any cash balances held by Flahmingo will be held in trust accounts with RBC Royal Trust for your benefit except that you agree that the interest earned on those funds will be paid to Flahmingo for its sole benefit. You acknowledge and agree that Flahmingo is receiving this interest on your uninvested cash balances as compensation for services provided.

   Tax Withholding

   Where required by applicable legislation, you will be responsible for any obligations owing in any of your Flahmingo accounts, including withholding tax. Withholding taxes of at least 15% will apply to dividends (and other distributions, if applicable) made by U.S.-listed securities.

   Voluntary Corporate Actions (VCA)

   Flahmingo is charged a fee for processing VCAs. If you decide to participate in a VCA, you may be charged a fee. Please refer to the Flahmingo Fee Schedule.

4. Suitability of investments

   As an order execution only platform, we do not provide investment advice and therefore, do not assess the suitability of any of your trades. An account with Flahmingo is intended for investors who are comfortable making their own investment decisions and taking responsibility for their investments. If you are looking for investment advice, you should not open a Flahmingo account.

   Flahmingo will not provide you with any recommendations and you are solely responsible for making all investment decisions in your order execution only accounts. Flahmingo will not be responsible for making a suitability determination for you and, in particular, Flahmingo will not consider your current financial situation, investment knowledge, investment objectives, time horizon, risk tolerance, or your account’s investment portfolio composition and risk level, nor other similar factors. Flahmingo will not be responsible for making a determination that the products and account types offered by us are suitable for you.

5. User Risk Disclosure

   We would like to inform you of the potential risks of currency conversions, trading online, and the inherent risks of trading in an extreme market environment.

   When converting currencies and trading online, you should be aware that during periods of high internet traffic, you might experience delays in accessing account data due to system capacity limitations. Additionally, system response times may be adversely affected by increased market volatility conditions, quote delays, system performance; and other factors outside the control of Flahmingo, which may include your computer system and internet service provider. You may also experience system outages or delays as a result of, among other things, power failures, programming failures or heavy trading volume. During periods of increased volatility, you might suffer market losses in the price of a currency, and the price and share volume of a particular stock when system problems result in an inability to convert currencies and place buy or sell orders. The risk of financial loss in currency conversion and trading online can be substantial; therefore, you should consider whether such currency conversions and trading are suitable for you in light of your circumstances and financial resources.

   We rely on the execution services of Alpaca as our sole executing broker for securities and may utilize a foreign exchange provider for currency conversions. As with all electronic systems, they are vulnerable to temporary disruption or failure. In the event system problems prevent our automated routing systems from sending your order(s) to designated market centers for execution or currency conversion, Flahmingo will notify all clients via email that the application is down and the reason for the technical outage. If any client would like to make a trade or currency conversion, they would then be directed to visit the website and contact us through a chatbot. A client service representative will authenticate the client and escalate the ticket to a Registered Representative that will take the trade and currency conversion instructions, verify the information, and manually contact our executing broker or foreign exchange provider to place the trade or currency conversion until the Flahmingo application is functioning again. During extreme market conditions, you might experience delays in order executions or currency conversions because market making firms or our foreign exchange provider will temporarily discontinue normal automatic order execution standards and currency conversions, respectively, and switch to a manual order process, and/or reduce their size guarantees on individual stocks.

   Custody of your securities and temporary custody of your cash for the purposes of currency conversion by a third party may increase certain risks, including insolvency risk (credit risk), fraud risk, or proficiency risk on the part of Flahmingo. You may also face risk in allowing Flahmingo to have access to securities and cash owned by you that are held with a third party custodian in the event that these securities and cash could be accessed improperly and misused. However, access to your securities and cash is permitted only to settle sell transactions initiated by you, and to settle foreign currency transactions initiated by you, respectively.

   In the event of the insolvency or bankruptcy of our executing broker or its market makers, and despite insurance coverage that may be available by the Securities Investor Protection Corporation in the United States, you could face delays and other difficulties in repatriating your assets as well as difficulties to enforce your rights. When a foreign exchange provider is used for currency conversion, although your funds will be held by the foreign exchange provider in an account that is only used for the foreign exchange provider’s clients, and not for their operational purposes, in the event of their insolvency or bankruptcy, you could face delays and other difficulties in repatriating your assets as well as, difficulties to enforce your rights. As your securities and cash may be custodied with third parties domiciled outside of Canada, you may experience difficulties enforcing legal rights against these third parties.

   As is the case with omnibus arrangements, Flahmingo relies on Alpaca for clearing, custodial, and bookkeeping services. Your beneficial ownership of securities is dependent on the recordkeeping by Flahmingo and Alpaca. Alpaca has an omnibus clearing agreement to provide clearing services for full share transactions with Velox Clearing LLC, who is a clearing broker-dealer registered with the U.S. Securities and Exchange Commission, and a member of the U.S. Financial Industry Regulatory Authority, the National Securities Clearing Corporation, Deposit Trust Company, and the Securities Investor Protection Corporation. Further, Flahmingo may rely on its foreign exchange provider for currency conversion services. Your beneficial ownership of cash, while it is in the temporary custody of the foreign exchange provider, is dependent on the recordkeeping by Flahmingo and the foreign exchange provider. The foreign exchange provider may be regulated by regulatory authorities outside of Canada such as the National Futures Association and may be registered with the U.S. Commodity Futures Trading Commission.

   There is risk of loss associated with investing in securities and currency conversion regardless of the method used. New investors need to understand the principles of investing and currency conversion, their own risk tolerance, and their investment goals before trading and converting currencies. In addition, online clients may want to consider these other risks. High Internet traffic may affect online clients’ ability to access their accounts or transmit their orders. Online clients should be skeptical of stock advice, currency conversion advice, and tips provided in chat rooms or bulletin boards. Investors should do their own research before trading and converting currencies. Also, for some online investors, there is a temptation to “overtrade“ by trading too frequently or impulsively without considering their investment goals or risk tolerance. Overtrading can affect investment performance, raise trading costs, and complicate your tax situation. You may also experience executions and currency conversions at prices significantly away from the market price quoted or displayed at the time an order was entered, less cash or shares than desired, or losses.

   Investing in securities and currency conversions can also generate tax consequences for which you will be solely liable. We recommend that you consult with a tax adviser as to how taxes may affect the outcome of your contemplated transactions.

   The following is a summary of some of the risks of investing in certain kinds of investments. Please note that the following list of risk factors is not intended to be exhaustive, nor a comprehensive explanation of the risks involved, and has been provided as an indication of the factors that can affect the value of your investments.

   1. Equity Risks. An equity investment is subject to market conditions and there can be no assurance that any appreciation in value will occur. The value of investments and the income from them can fluctuate and may fall and there is no certainty that an investor will get back any part of its investment. The prices of equity securities can rise or fall significantly in a short period of time, due to factors including the fortunes of the companies that issue them or with general stock market or economic conditions. If the prices of equity securities that you hold fall in a short period of time, it could significantly affect the value of your investments.
   2. Credit Risk. A fixed income security, like a bond, is essentially a promise to pay interest and repay a specified amount at a later time. “Credit risk” is the probability that the issuer of the fixed income security will fail to honour that promise to pay interest. If a company or government has a high credit rating, the credit risk tends to be low. A lower credit rating means more credit risk.
   3. Debt securities risks. All debt instruments, including bonds are potentially exposed to risks, in particular to credit and interest rate risk. Debt securities may be subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may be subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the Issuer, general market liquidity and other economic factors.
   4. Short selling risks. Short selling securities involves risk because there is no assurance that securities will sufficiently decline in value during the period of the short sale to offset the interest paid by the investor and make a profit for the investor. Securities sold short may instead increase in value. The investor may also experience difficulties repurchasing and returning the borrowed securities.
   5. Interest rate risk. If interest rates fall, the values of the bond rises because the interest rate on the existing bond will be higher than the rate on newer bonds. When general interest rates rise, the price of existing bonds is expected to drop because they pay less than newer bonds.
   6. Foreign markets. Companies outside of Canada and the U.S. may be less regulated and have lower standards of accounting and financial reporting, and foreign countries may not have an established stock market and legal system that adequately protects the rights of investors may be lacking. Foreign investments can also be affected by social, political, or economic instability, and foreign governments may limit foreign investment, which can affect the value of investments.
   7. Foreign currency. Securities that are priced in foreign currencies can lose value when the Canadian dollar rises against the foreign currency. Foreign governments may also impose currency exchange restrictions, which could limit the ability to buy and sell certain foreign investments and could reduce the value of the foreign securities held by investors.
   8. Derivative investments. A derivative is a type of investment whose value is derived from the performance of other investments or from the movement of interest rates, exchange rates or market indices. There is no guarantee that the derivative will be bought or sold at the right time to make a profit or limit a loss, nor that the other party to the contract will meet its obligations. There is also no guarantee that a hedging strategy will always work, and hedging may not offset a drop in the value of a security.
   9. Exchange-traded funds (ETF) risks. An ETF may fail to accurately track the market segment or index that underlies its investment objective. The performance of an ETF may be lower than the performance of an actively managed fund. Some ETFs employ leverage, which can magnify the risk of the underlying market segment or index, and the market price of ETF units may trade at a discount to its net asset value.

6. Disclosure of conflicts of interest

   Flahmingo and its representatives must act fairly, honestly and in good faith with you and our other clients. We may have conflicts of interest in providing you with services. These conflicts may be actual conflicts of interest or you may perceive that we have a conflict of interest. For more information on how we handle conflicts of interest, please see our Conflicts of Interest Statement.

7. Reporting

   Trade Confirmations

   When you buy or sell securities, a trade confirmation will be sent to you electronically, within one business day of the settlement date.

   It will contain the details of the transaction including but not limited to:

   1. Security name, marketplace, and dates
   2. Amount paid by you for a purchase or paid to you on a sale
   3. Amount of any commission, spread, charge or fee applied, if any

   Account Statements

   You will receive an account statement monthly whether or not there has been activity in your account (excluding interest and dividend payments) at any time in the most recent month or in the two preceding months, or upon request.

   Each statement for the reporting period will include but is not limited to:

   1. Your name, address, account type, and account number
   2. Book cost and market value of all holdings in the account
   3. Activity that occurred in the account for the reporting period

   Annual Report on Charges and Other Compensation

   Each year, you will receive a report, for the 12 months ended December 31st which will set out the following:

   1. The fees and charges related to the operation of your account
   2. Any compensation received by us from an issuer of securities or another dealer or adviser

   Annual Performance

   Each year, you will receive a report, for the 12 months ended December 31st which will set out the following:

   1. The change in the value of your investments
   2. The amount of any deposits and withdrawals to/from your account
   3. The allocation of your assets between cash and securities

8. Benchmarks

   An investment performance benchmark is a standard against which you can compare the performance of your investments. Flahmingo does not provide benchmarks to clients for the purpose of assessing the performance of a client’s investments.