Form CRS - Customer Relationship Summary
Succinct information about the relationships and services we offer to retail investors, fees and costs retail investors will pay, specified conflicts of interest and standards of conduct, our and our financial professionals’ disciplinary history, and other important matters can be found in our Form CRS - Customer Relationship Summary.
Regulation Best Interest Disclosure Document
Detailed information about the scope and terms of our relationships with broker-dealer retail customers, conflicts of interest we have in connection with our broker-dealer services, and other important matters can be found in our Regulation Best Interest (Reg BI) Disclosure Document.
Cash Sweep Program Disclosures for LFA Accounts Held with NFS
In its capacity as broker-dealer of record for accounts held with National Financial Services LLC (“NFS”), Lincoln Financial Advisors Corporation (“LFA”) offers a “cash sweep” program that allows clients to have their cash balances awaiting investment (e.g., from cash deposits, securities transactions, dividend and interest payments, and other activities) automatically deposited, or “swept,” into a core account investment vehicle, or “cash sweep,” that LFA makes available for their account type. Effective on or about March 5, 2024, LFA’s cash sweep program will provide clients with access to LFA’s Insured Bank Deposit Account (the “IBDA”), LFA’s Insured Bank Retirement Advisory Account (the “IBRAA”), or a money market mutual fund as described below.
BANK SWEEP PROGRAMS
Effective on or about March 5, 2024, LFA will designate its Insured Bank Deposit Account, or “IBDA” (Symbol: QBLFQ), as the default and only cash sweep that is available for use by IBDA-eligible accounts held with NFS. Additionally, LFA will designate its Insured Bank Retirement Advisory Account, or “IBRAA” (Symbol: QRLFQ), as the default and only cash sweep that is available for use by IBRAA-eligible accounts held with NFS.
Clients participating in the IBDA or the IBRAA (together, the “Programs”) will have their cash balances awaiting investment automatically swept into interest-bearing Federal Deposit Insurance Corporation (“FDIC”) insurance eligible accounts at one or more FDIC-insured program banks (“Program Banks”). Through the Programs, participating clients are eligible for up to a maximum of $2.5 million in FDIC insurance coverage for individual accounts or up to $5.0 million in FDIC insurance coverage for joint accounts, subject to clients’ total amounts on deposit with the Program Banks, applicable FDIC rules, Program Bank availability, and other factors described in LFA’s Bank Sweep Program Disclosure Document.
Clients are urged to review the important information at the following hyperlinks before consenting to the use of the IBDA or the IBRAA as the cash sweep for their accounts:
- Bank Sweep Program Disclosure Document — Provides detailed information regarding the IBDA and the IBRAA, including how and when participating clients’ cash will be swept to the Program Banks, clients’ options if they do not consent to the use of the IBDA or the IBRAA as their cash sweep, FDIC insurance coverage and applicable limitations, the compensation that LFA receives from the Program Banks as a result of clients’ use of the Programs, LFA’s conflicts of interest in connection with the Programs, and other important matters.
- Interest Rate Schedule — Provides the interest rates and annual percentage yields that participating clients will receive on their cash balances deposited in the IBDA and the IBRAA.
- IBDA Program Bank List and IBRAA Program Bank List — Provide lists of the Program Banks into which participating clients’ cash balances will be automatically swept through the IBDA and the IBRAA, respectively, and the sequence in which the Program Banks will receive clients’ cash balances, based on the states reflected in clients’ account mailing addresses. For additional information regarding the application of the Program Bank lists, the function of “Excess Deposit Banks” included on the Program Bank lists, how to obtain publicly available financial information regarding the Program Banks, how to “opt out” of one or more Program Banks, and other important matters, please review Bank Sweep Program Disclosure Document.
- Account Eligibility Information — Provides a description of the account types that are eligible to participate in the IBDA and the IBRAA, as well as those that are not.
- Compensation and Conflict of Interest Disclosure — Provides important information regarding the compensation that LFA receives from the Program Banks as a result of clients’ use of the IBDA and the IBRAA as their cash sweeps and LFA’s related conflicts of interest. For additional information regarding these matters, clients should review LFA’s Bank Sweep Program Disclosure Document and Interest Rate Schedule, as well as LFA’s Form CRS, Regulation Best Interest (“Reg BI”) Disclosure Document (for commission-based brokerage clients), and applicable Forms ADV Part 2A (for fee-based investment advisory clients), all of which are hyperlinked on this webpage.
- Frequently Asked Questions — Provides answers to clients’ frequently asked questions regarding the IBDA and the IBRAA.
- Money Market Mutual Fund Overflow Information – Provides the current prospectus and other important information regarding The Fidelity® Government Money Market Fund Class S (“FZSXX”), which is the money market overflow for clients participating in the IBDA and the IBRAA. When clients’ funds cannot be placed at a Program Bank (e.g., if the IBDA or the IBRAA does not have sufficient deposit capacity to accept new or maintain existing deposits), any cash balances that cannot be placed or maintained with a Program Bank will be swept into FZSXX. For detailed information regarding the money market overflow feature of the IBDA and the IBRAA, clients should review LFA’s Bank Sweep Program Disclosure Document. Additionally, clients are encouraged to review the prospectus for FZSXX for detailed information regarding the fund’s expenses and other important matters before consenting to the use of the IBDA or the IBRAA as the cash sweep for their accounts.
If you have any questions regarding the IBDA or the IBRAA, please contact your LFA financial professional before consenting to the use of the IBDA or the IBRAA as the cash sweep for your accounts.
MONEY MARKET MUTUAL FUNDS
Effective on or about March 5, 2024, LFA will designate Fidelity® Government Cash Reserves (“FDRXX”), a government money market fund, as the default and only cash sweep that is available for selection by accounts held with NFS that are not eligible to participate in the IBDA or the IBRAA (as described in LFA’s Bank Sweep Program Disclosure Document and Account Eligibility Information). The current prospectus and other important information regarding FDRXX can be found here. Clients are encouraged to review the prospectus for FDRXX for detailed information regarding the fund’s expenses and other important matters before selecting or consenting to the use of FDRXX as the cash sweep for their accounts.
If your account with LFA uses FDRXX or any other money market mutual fund as a cash sweep, please contact your LFA financial professional with any questions you may have regarding the fund or to request a current prospectus for the fund. Additionally, commission-based brokerage clients should review LFA’s Form CRS and Reg BI Disclosure Document, and fee-based investment advisory clients should review LFA’s Form CRS and applicable Forms ADV Part 2A, all of which are hyperlinked on this webpage, for important information regarding the compensation that LFA receives in connection with clients’ use of certain money market mutual funds as cash sweeps and LFA’s related conflicts of interest.
Day Trading Risk
Consider the following points before engaging in a day-trading strategy. In this instance, a day-trading strategy means an overall trading strategy characterized by a client's regular transmission of intra-day orders to make both purchase and sale transactions in the same security or securities.
Day trading can be extremely risky
Generally, it is not appropriate for someone of limited resources, limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success.
Be cautious of claims of large profits from day trading
Be especially wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.
Day trading requires in-depth knowledge of securities markets trading techniques and strategies
In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading.
Day trading requires knowledge of a firm's operations
You should be familiar with a securities firm's business practices, including the operation of the firm's order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures.
Day trading will generate substantial commissions, even if the per-trade cost is low
Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 transactions are conducted per day, an investor would have to generate an annual profit of $111,360 just to cover commission expenses.
Day trading on margin or short selling may result in losses beyond your initial investment
When you day trade with funds borrowed from a firm or another party, you can lose more than the funds you originally placed at a risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day-trading strategy also may lead to extraordinary losses, since you may have to purchase a stock at a very high price to cover a short position.
Potential registration requirements
Persons who provide investment advice or manage securities accounts for others may be required to register as either an Investment Advisor under the Investment Advisors Act of 1940 or as a Broker or Dealer under the Securities Exchange Act of 1934. Such activities may also trigger state registration requirements.
Lincoln Financial Advisors (LFA) is committed to providing you with information about the purchase of securities on margin. Every investor who considers trading securities in a margin account should be alerted to the risks. Before you decide to trade on margin:
- Ask your LFA financial professional to discuss whether margin trading would help meet your needs.
Carefully review the margin agreement provided by LFA or any other brokerage firm.
Ensure you understand the costs associated with margin trading.
HOW MARGIN TRADING WORKS
When you purchase securities, you may either pay for them in full or borrow part of the purchase price from your brokerage firm. If you borrow money from the brokerage firm, you will open a margin account with the firm. The purchased securities are the firm's collateral for the loan.
What are the risks?
If the securities in your account decline in value, so will the value of the collateral supporting your loan. In that event, the firm may issue a margin call, which requires you to deposit more money or securities to maintain your line of credit. If you are unable to do so, the firm may sell securities or other assets in any account you have with the firm to maintain the required equity in the margin account.
Frequently Asked Questions:
Yes. A decline in the value of securities purchased on margin may require you to provide additional funds to the brokerage firm that made the loan.
Yes. If the equity in your account falls below mandatory margin maintenance requirements — or higher "house" requirements stated by the firm — and you are unable to provide additional funds, the firm may force the sale of those securities or other securities or assets in your account(s) to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale.
Yes. Most firms notify clients about margin calls, but they are not obligated to do so. Even if a firm contacts you and sets a date by which you must meet the margin call, it can sell the securities without notice to you to protect its interests.
No. Since the securities are collateral for the margin loan, the firm decides which securities to sell to protect its interests.
Yes. These changes often take effect immediately and may result in a margin call. If you are unable to satisfy the call, the firm may sell securities in your account(s).
No. An extension may be allowed under certain conditions, but the firm is not obligated to provide one.
Quarterly Order Routing Practices Report
Lincoln Financial Advisors (LFA) prepares a quarterly order routing practices report pursuant to a U.S. Securities and Exchange Commission (SEC) rule that requires all brokerage firms to make these practices publicly available. The report provides information on the routing of non-directed orders, that is, any orders that customers have not specifically instructed to be routed to a particular venue for execution.
LFA transmits non-directed orders to our clearing firm, who may then route customer orders to various venues for execution. We offer brokerage account services through: National Financial Services, LLC®, (NFS) a Fidelity® Investments Company.