A. Description of the factors that we consider in selecting or recommending broker-dealers for client transactions and determining the reasonableness of their compensation (e.g., commissions).
Tamar can clear its executed transactions through National Financial Services (NFS), Schwab Institutional, Pershing, LLC, RBC Capital Markets, Wedbush Morgan Securities, Inc., Legent Clearing Corp, and Crews & Associates, Inc. Separately, Tamar’s Preferred Custodians where clients’ assets are custody include: Schwab Institutional, and National Financial Services. In addition, only Israeli Citizens domiciled in Israel can chose to custody with Bank Hapoalim.
While we recommend that clients use our preferred custodians, clients could decide whether or not to follow our advice. Clients that chose to establish accounts with their elected custodians could do so directly with them. At Tamar, we do not open these direct accounts for our clients.
At Tamar Securities, LLC, we seek to recommend custodians/broker-dealers that hold our clients’ assets and execute their transactions on terms that are most advantageous when compared to other available providers and their services. The following, are some of the wide range factors we consider when recommending preferred custodians.
• combination of transaction execution services along with asset custody services
• capability to execute, clear and settle trades (buy and sell securities for your account)
• capabilities to facilitate transfers and payments to and from accounts (wire transfers, check requests, bill payment, etc.)
• breadth of investment products made available (stocks, bonds, mutual funds, exchange traded funds (ETFs), etc.)
• availability of investment research and tools that assist us in making investment decisions
• quality of services
• competitiveness of the price of those services (commission rates, margin interest rates, other fees, etc.)
• reputation, financial strength and stability of the provider
• trading capabilities
• experience, knowledge and professionalism of the individuals executing the transactions
• Access to a wide range of offerings
• Access to Bid Wanted lists
• Access to Initial Public Offerings, Best price execution, and up to standard technological advancements for best execution, asset allocation, and reporting capabilities
1. Research and Other Soft Dollar Benefits. If we receive research or other products or services other than execution from a broker-dealer or a third party in connection with client securities transactions (“soft dollar benefits”), we are required to disclose our practices and discuss the conflicts of interest they create.
Our preferred custodians provide us and our clients with access to its institutional brokerage – trading, custody, reporting and related services. They also makes available various support services. Some of those services help us manage or administer our clients’ accounts while others help us manage and grow our business. Our preferred custodians’ support services are generally available on an unsolicited basis.
a. Explanation of when we use client brokerage commissions (or markups or markdowns) to obtain research or other products or services, and how we receive a benefit because our firm does not have to produce or pay for the research, products or services.
Our firm does not utilize client brokerage commissions to obtain research or other products or services. Our preferred custodians may make certain research and brokerage services available at no additional cost to our firm. These services include including research services such as research reports on recommendations or other information about, particular companies or industries; economic surveys, data and analysis; financial publications; portfolio evaluation services; financial database software and services; computerized news and pricing services; quotation equipment for use in running software used in investment decision-making; and other products or services that provide lawful and appropriate assistance to us in the performance of our investment decision-making responsibilities. The aforementioned research and brokerage services are used by our firm to manage accounts. Without this arrangement, our firm might be compelled to purchase the same or similar services at our own expense.
b. Incentive to select or recommend a broker-dealer based on our interest in receiving the research or other products or services, rather than on our clients’ interest in receiving best execution.
As a result of receiving the services discussed in 12A(1) of this Firm Brochure, we may have an incentive to continue to use or expand the use of our preferred custodians’ services. Our firm examined this potential conflict of interest and we have determined that the relationship is in the best interest of our firm’s clients and satisfies our client obligations, including our duty to seek best execution.
Our preferred custodians charge brokerage commissions and transaction fees for effecting certain securities transactions (i.e., transaction fees are charged for certain no-load mutual funds, commissions are charged for individual equity and debt securities transactions). They enable us to obtain many no-load mutual funds without transaction charges and other no-load funds at nominal transaction charges. Our preferred custodians’ commission rates are generally discounted from customary retail commission rates.
However, the commission and transaction fees charged by our preferred custodians may be higher or lower than those charged by other custodians and/or broker-dealers.
c. Causing clients to pay commissions (or markups or markdowns) higher than those charged by other broker-dealers in return for soft dollar benefits (known as paying-up).
Our non-wrap fee program clients may pay a commission to our preferred custodians that are higher than the amount another qualified broker-dealer might charge to effect the same transaction. We determined in good faith that the commission is reasonable in relation to the value of the brokerage and research services received. In seeking best execution, the determinative factor is not the lowest possible cost, but whether the transaction represents the best qualitative execution, taking into consideration the full range of a broker-dealers’ services, including the value of research provided, execution capability, commission rates, and responsiveness. Accordingly, although we will seek competitive rates, to the benefit of all clients, we may not necessarily obtain the lowest possible commission rates for specific client account transactions.
d. Disclosure of whether we use soft dollar benefits to service all of our clients’ accounts or only those that paid for the benefits, as well as whether we seek to allocate soft dollar benefits to client accounts proportionately to the soft dollar credits the accounts generate.
Investment research products and services that are obtained by our firm will generally be used to service all of our clients. In particular, Schwab Advisor Services assists our firm by offering $9,500 to use toward technology related expenses to service all advisory clients.
e. Description of the types of products and services our firm or any of our related persons acquired with client brokerage commissions (or markups or markdowns) within our last fiscal year.
In addition to the benefits described in Item 12A1 of this Brochure, our preferred custodians may also make available to our firm other products and services that benefit us, but may not directly benefit our clients’ accounts. These benefits may include: educational conferences and events, technology, compliance, legal, and business consulting; publications and conferences on practice management and business successions; and access to employee benefits providers, human capital consultants and insurance providers. In addition, our preferred custodians may make available, arrange and/or pay vendors for these types of services rendered to our firm by independent third parties. Our preferred custodians may discount or waive fees it would otherwise charge for some of these services or pay all or a part of the fees of a third-party providing these services to our firm.
Some of these products and services assist our firm in managing and administering clients’ accounts.
These include software and other technology (and related technological training) that provide access to client account data (such as trade confirmations and account statements), facilitate trade execution (and allocation of aggregated trade orders for multiple client accounts), provide research, pricing information and other market data, facilitate payment of our fees from clients’ accounts, and assist with back-office training and support functions, recordkeeping and client reporting.
Many of these services generally may be used to service all or some substantial number of our accounts, including accounts not maintained at our preferred custodians.
While as a fiduciary, our firm endeavors to act in our clients’ best interests, our recommendation that clients maintain their assets in accounts at our preferred custodians may be based in part on the benefit our firm receives and not solely on the nature, cost, or quality of custody and brokerage services provided by our preferred custodians. This interest conflicts with the clients' interest of obtaining the lowest commission rate available. Therefore, we must determine in good faith, based on the best execution policy stated above that such commissions are reasonable in relation to the value of the services provided by such executing broker-dealers.
f. Explanation of the procedures we used during our last fiscal year to direct client transactions to a particular broker-dealer in return for soft dollar benefits we received.
We do not direct client transactions to a particular broker-dealer for soft dollars.
2. Brokerage for Client Referrals. If we use client brokerage to compensate or otherwise reward brokers for client referrals, we must disclose this practice, the conflicts of interest it creates, and any procedures we used to direct client brokerage to referring brokers during the last fiscal year (i.e., the system of controls used by us when allocating brokerage)
Our firm does not receive brokerage for client referrals.
3. Directed Brokerage.
a. If we routinely recommend, request or require that a client directs us to execute transactions through a specified broker-dealer; we are required to describe our practice or policy.
Not all advisers require their clients to direct brokerage. We do not require clients direct brokerage, however, neither we nor any of our firm’s related personnel have discretionary authority in making the determination of the brokers with whom orders for the purchase or sale of securities are placed for execution, and the commission rates at which such securities transactions are effected.
Special Considerations for ERISA Clients.
A retirement or ERISA plan client may direct all or part of portfolio transactions for its account through a specific broker or dealer in order to obtain goods or services on behalf of the plan. Such direction is permitted provided that the goods and services provided are reasonable expenses of the plan incurred in the ordinary course of its business for which it otherwise would be obligated and empowered to pay. ERISA prohibits directed brokerage arrangements when the goods or services purchased are not for the exclusive benefit of the plan. Consequently, we will request that plan sponsors who direct plan brokerage provide us with a letter documenting that this arrangement will be for the exclusive benefit of the plan.
b. If we permit a client to direct brokerage, we are required to describe our practice. If applicable, we must also explain that we may be unable to achieve best execution of your transactions.
We allow clients to direct brokerage. However, we may be unable to achieve the most favorable execution of client transactions. Client directed brokerage may cost clients more money. For example, in a directed brokerage account, you may pay higher brokerage commissions because we may not be able to aggregate orders to reduce transaction costs, or you may receive less favorable prices.
B. Discussion of whether, and under what conditions, we aggregate the purchase or sale of securities for various client accounts in quantities sufficient to obtain reduced transaction costs (known as bunching). If we do not bunch orders when we have the opportunity to do so, we are required to explain our practice and describe the costs to clients of not bunching.
We perform investment management services for various clients. There are occasions on which portfolio transactions may be executed as part of concurrent authorizations to purchase or sell the same security for numerous accounts served by our firm, which involve accounts with similar investment objectives. Although such concurrent authorizations potentially could be either advantageous or disadvantageous to any one or more particular accounts, they are affected only when we believe that to do so will be in the best interest of the effected accounts. When such concurrent authorizations occur, the objective is to allocate the executions in a manner which is deemed equitable to the accounts involved. In any given situation, we attempt to allocate trade executions in the most equitable manner possible, taking into consideration clients’ objectives, current asset allocation and availability of funds using price averaging, proration, and consistently non-arbitrary methods of allocation.
Our firm participates in prime brokerage services provided by different bond traders. Orders shall be transmitted to bond dealers for trade executions. Purshe Kaplan Sterling Investments clears our prime brokerage transactions in our block trading brokerage account established in the name of Tamar Securities, LLC with our preferred custodian; Schwab Institutional. Next, block trades are allocated to mark up designated clients prior to placing orders. Also, fee based block trades cleared by prime brokerage firms are allocated in the same way to designated clients prior to placing orders. There are no mark ups applied to block trades allocated to advisory accounts.
Pursuant to the prime brokerage services agreement, Tamar Securities, LLC will maintain all details of each prime brokerage transaction, including, but not limited to; contract amount, the security involved, the number of shares or units, and whether the transaction was a long or short sale or a purchase.