Account Protection

• FELDSTEIN FINANCIAL GROUP' accounts containing our clients' securities are insured by the Securities Investor Protection Corporation ("SIPC") for up to $500,000 (up to a maximum of $250,000 of which may be paid out as compensation for cash positions) and by FELDSTEIN FINANCIAL GROUP, in cooperation with Lloyd's of London, an insurance firm. U.S. dollars may be allocated to cash positions) and by FELDSTEIN FINANCIAL GROUP, in cooperation with Lloyd's of London, for up to $30 million (of which no more than $900,000 may be allocated to cash positions). The aggregate amount of insurance payments may not exceed USD 150 million. Futures and options on futures are not eligible for insurance benefits. As with all securities firms, this insurance coverage protects investors in the event of the bankruptcy of the broker-dealer, not a decline in the market value of the securities.
• To differentiate between accounts with similar owner names, FELDSTEIN FINANCIAL GROUP combines accounts of the same type (e.g., John and Jane Smith and Jane and John Smith) but keeps accounts of different types (e.g., Individual/John Smith and IPS/John Smith) separately.
  
  SIPC is a membership corporation funded by participating broker-dealers.

Investor Protection

• FELDSTEIN FINANCIAL GROUP' enhanced client protection system reduces the risk of undercompensation in the event of a firm liquidation. Virtually all other broker-dealers calculate amounts due to clients on a weekly or monthly basis. Under this approach, funds transferred by clients in the interim are at risk because these firms protect only the capital available in the client's account at the last settlement. FELDSTEIN FINANCIAL GROUP, on the other hand, calculates and sets aside funds due to clients each business day. In the event of a firm closing, which is highly unlikely, the trustees would easily be able to determine our indebtedness to all clients. The trustees of other broker-dealers would have to recreate last week's operations, which, based on the example of the Lehman bankruptcy, significantly slows down recoveries.
• FELDSTEIN FINANCIAL GROUP applies risk margin requirements (collateral) to customer accounts in real time, whereas most industry participants use risk margin at the close of the trading day. If a client is found to have insufficient assets to cover the risk of their open positions, FELDSTEIN FINANCIAL GROUP will typically liquidate positions in real time to bring the account back into compliance with margin requirements. Other broker-dealers often allow their clients to be exposed to such risk for several days.
• FELDSTEIN FINANCIAL GROUP real-time margin requirements and protective liquidations significantly reduce the threat of client losses associated with the trading activities of other traders working through us and the threat those losses pose to FELDSTEIN FINANCIAL GROUP. Other broker-dealers practice of calculating risk at the end of the day increases the likelihood that volatile market conditions will strike their clients assets. Firms that do not require immediate liquidation of positions and allow delayed deposits of needed funds expose their customers to mutual credit risk.
• Another strong advantage of doing business through FELDSTEIN FINANCIAL GROUP is that the company has no proprietary inventory. FELDSTEIN FINANCIAL GROUP acts solely as an assistant in executing client trades and does not make its own bets regarding market direction. The two most famous brokerage bankruptcies of the last ten years (Lehman Brothers and MF Global) were caused by the risk associated with the private assets of these firms.
  Since FELDSTEIN FINANCIAL GROUP does not trade independently, the risk of company collapse and the resulting red tape with client funds is much lower than with other broker-dealers with proprietary positions. In addition, users of FELDSTEIN FINANCIAL GROUP do not have to worry about being used by a broker to game the market.
• All broker-dealers are allowed to lend out customer securities (so-called "over-hedging") if the customer takes out a margin loan (a loan against the securities). When FELDSTEIN FINANCIAL GROUP re-pledges a customer's securities, it creates a daily cash reserve of 103% of the market value of those securities. Most other broker-dealers do this only once a week.
  By setting aside client funds each day, FELDSTEIN FINANCIAL GROUP ensures that segregated capital in excess of the market value of the pledged shares is available in case a recovery is needed. In the situation with other broker-dealers that settle weekly, client funds and assets are exposed to additional risk of loss because they are not protected during the week.
• Unlike other brokers, FELDSTEIN FINANCIAL GROUP segregates money every 24 hours to cover the value of those client-owned securities that are temporarily outside the proper control location 1. This is a common occurrence in the industry known as a "segregation deficit." Other brokers may allow such shortages to exist for several days before taking action.
  FELDSTEIN FINANCIAL GROUP mitigates client risk by ensuring that the market value of all securities outside the proper control location is set aside in cash on a daily basis. This provides FELDSTEIN FINANCIAL GROUP traders with greater confidence in the correct segregation of all their assets. Many other brokers will allow a deficit to exist for a few days before taking additional steps to protect their clients.
• Finally, FELDSTEIN FINANCIAL GROUP does not belong to a banking structure, which cannot be said of most broker-dealers with comparable capital. This gives FELDSTEIN FINANCIAL GROUP a more stable platform in the event of a major crisis.
  Broker-dealers affiliated with banks are subject to in-depth supervision by banking system regulators, which leads to additional uncertainty as to who will own the rights to their assets if the firm goes bankrupt. Since FELDSTEIN FINANCIAL GROUP is not a bank, the return of clients money and securities will happen much faster. Moreover, in case of economic crisis, financial resources of FELDSTEIN FINANCIAL GROUP will be directed exclusively to ensure uninterrupted brokerage activities of the firm. Bank-owned broker-dealers, on the other hand, depend on the capital of these banks and are usually a subsidiary of the parent banking company. Unlike FELDSTEIN FINANCIAL GROUP they are not autonomous self-supporting structures, which results in additional risk for their clients. In an economic crisis, such broker-dealers will have to compete with their banks for capital and liquidity. This could result in funds being diverted from the broker-dealer to an affiliated bank to the detriment of their customers. A historical example of this is Lehman Brothers and Bear Stearns, which began siphoning off funds from broker-dealers they owned in an attempt to save their banks, which were the original cause of their financial problems. Eventually, both entities filed for bankruptcy. Their customers then experienced significant delays in accessing assets and transferring them to a functioning broker-dealer. And in the midst of the financial crisis, people withdrew their money and assets from bank-affiliated broker-dealers and deposited them with FELDSTEIN FINANCIAL GROUP.