Relationship Disclosure Document

Introduction
Gravitas Securities Inc. (‘GSI’) believes that a solid client relationship begins with a disclosure of who and what GSI is and what we can provide our clients to ensure that they meet or exceed their financial objectives. This ‘Client Relationship Disclosures’ (‘CRD’) ensures that GSI’s clients understand the products and services that they can receive from GSI, the kinds of accounts they have with GSI, the manner in which the client accounts are operated, a description of GSI’s regulatory requirements issued under Canadian Securities Legislation and regulators for ‘Know-Your-Client’ (‘KYC’) requirements, GSI’s responsibilities to our clients and our clients responsibilities to GSI.

Who are we?
GSI is a brokerage firm and a member of the Investment Industry Regulatory Organization of Canada (IIROC) and of the Canadian Investor Protection Fund (CIPF). The company provides a comprehensive range of specialized services to private individuals, businesses and institutional investors. GSI will only act as a brokerage firm in the jurisdictions that GSI is licensed.

GSI provides the following services:

GSI is an Introducing Broker. Under this arrangement, GSI has partnered with the National Bank Independent Network (‘NBIN’), a wholly owned subsidiary of the National Bank of Canada, Canada's leading supplier of brokerage services which serves many independent firms to provide administration, settlement, and safekeeping services for GSI’s clients' assets.

GSI does have several affiliated companies: Please refer to our Statement of Policies section noted below for a complete and up to date list as of the date of this CRD.

GSI will provide a copy of our CRD at the time a client opens an account with GSI. GSI will update our CRD whenever there is a material change to the CRD and update our clients in a timely manner. The most current version of our CRD will be posted on GSI’s website (www.Gravitasssecurities.com).

As an investment dealer, GSI offers a complete range of financial services and products designed to meet our client’s needs. Below is a summary of the services and products offered by GSI.

Services offered by GSI
GSI offers advisory (Commission and Fee based accounts) and managed accounts with different compensation structures.

Advisory Accounts

Commission-based advisory account
If you open a commission-based advisory account, you will need to speak to your Investment Advisor (‘IA’) prior to making any transaction on your account (whether buying or selling). You are responsible for making the investment decisions concerning your account, but may base your choices on the advice given by your IA. Your IA is responsible for the advice given and to make suitable investment recommendations and provide unbiased investment advice. You will need to stay informed and to participate actively in making investment decisions since you will ultimately be responsible for all decisions made. This type of account allows you to work closely with your IA to select individual investments. Commission fees will normally be charged for each transaction.

Fee-based advisory accounts
If you open a fee-based advisory account, you will need to speak to your IA prior to making any transaction on your account (whether buying or selling). You are responsible for making the investment decisions concerning your account, but may base your choices on the advice given by your IA. Your IA is responsible for the advice given and to make suitable investment recommendations and provide unbiased investment advice. You will need to stay informed and participate actively in making investment decisions since you will ultimately be responsible for all decisions made. This type of account allows you to work closely with your IA to select individual investments. Buying or selling commissions normally paid to your IA are replaced by fees based on the value of your assets at the end of each month. However, depending on the type of agreement, operation fees may be charged as described in the fee-based advisory account agreement that you will be asked to sign.

Managed Accounts
If you open a managed account, investment decisions will be made on an ongoing basis by your Portfolio Manager (‘PM’). Your PM will therefore make no recommendations and you will have no decisions to make since your account will be managed according to a pre-established investment policy statement (‘IPS’) based on Know your Client (‘KYC’) form. Account fees will be based on a pre-established agreement with your PM.

Account types may include the following:

Non-registered accounts

  • Cash account – for clients who plan to settle each transaction in full.
  • Margin account – for clients who are considering borrowing funds guaranteed by securities already held in the account.
  • Option account – account with margin in which options may be processed.
  • Cash on delivery account – payments are settled via another financial institution or other broker firm which also acts as securities custodian.
  • These accounts are available in Canadian and U.S dollars.

Registered Accounts

  • Self-directed RRSP and RRIF – for clients who wish to grow a range of eligible tax-free investments.
  • LIRA / LIF – type of account in which a person can transfer the amount from his or her supplemental pension plan or locked-in retirement account (LIRA)
  • Tax-Free Savings Account (TFSA) – for clients who wish to grow tax-free investments with the option of withdrawing funds for an emergency, or any other reason, with no tax consequences.
  • Registered Education Savings Plan (RESP) – for clients who wish to grow tax-free investments to finance a child’s education.
  • Most registered plan accounts are available in Canadian and U.S. dollars.

Other services offered by GSI
RRSP loan – this service allows clients to borrow the funds they need to contribute to an RRSP or use their unused contribution room;
Automatic revenue transfer – this allows clients to transfer investment dividends and interest from the revenue account to a bank account at any financial institution.

Our Investment Products
With the help of your IA, you need to make sure that you fully understand how the investment product works and identify all costs associated with it. Your Investment Advisor or Portfolio Manager will make sure that the product matches your investment objectives, risk tolerance and time horizon. As the potential performance of an investment increases, generally the risk of the investment increases. Investments with high returns and low risk simply do not exist. To obtain the best performance, you must find you level of your acceptable risk.

Low-risk cash products
Generally, these offer the option to cash an investment product quickly and at a low cost.

  • Treasury bond – this constitutes a short-term loan to the Government that issues it. The duration of treasury bonds is normally less than a year. Treasury bonds do not pay interest: they are sold at a discount and, when matured, are reimbursed to the bearer at their nominal value. The resulting difference replaces the interest. Treasury bonds entail practically no credit risk. They may also be redeemed before maturity.
  • Savings bond – this constitutes a loan to the Government that issues it and is guaranteed by their power to impose taxes. Most savings bonds have a yearly fixed interest rate. Some bonds have a minimum interest rate which may be increased by the issuer depending on the economic climate. Savings bonds are guaranteed by the issuer and therefore are low risk.
  • Guaranteed Investment Certificate (GIC) – a title certifying a deposit held, issued by a financial institution. The duration of GICs range between 30 days and 10 years. Most GICs produce interest at a fixed rate until maturity.
  • Money Market Fund – this is an open-ended mutual fund which invests in short-term fixed income securities. Money market fund securities are usually issued at a fixed price of $10 per unit. Performance will depend on investments made by the Fund. The risk is usually low as investments are made in short-term, “high quality“ securities.

Fixed income securities
When you subscribe to bonds or other types of fixed income securities, you are lending money to the Government or issuing organization for a certain amount of time. In return, the issuer promises to pay interest at a fixed rate, at set times and to repay the face value of the security when it matures. Fixed income securities may be purchased or sold at a price higher or lower than their face value, which varies with the interest rates. Value is also a function of the issuer’s credit rating. The risk associated with these types of product ranges from low to high. Below is in a non-exhaustive sampling of securities considered to be of the fixed income type:

  • Bonds – the duration of bonds ranges mostly between one and 30 years. In general, interest is paid at a fixed rate determined at the time of issue. Performance varies with interest rates and the issuer’s credit rating.
  • Debentures – these function along the same principles as bonds, but they are not guaranteed.
  • Strip bonds – the duration of strip bonds usually ranges between 18 months and 30 years. They are sold at a discount and, upon expiry, are repaid at face value with the difference representing the interest. Longer durations offer proportionally greater discounts.
  • Mortgage-backed securities – titles representing participation in a mortgage portfolio. The duration of mortgage-backed securities ranges between one and 10 years. Mortgage-backed securities offer a fixed rate of return, typically on a monthly basis. Monthly revenues are composed of a part of the payments on principal and interest from mortgage loans.

Equity Securities

  • Common shares – common shares are issued by companies and entitle the shareholders to participation in that company’s ownership. The risk associated with this type of product ranges from moderate to very high.
  • Flow-through shares – these shares are issued by certain oil, gas and mining companies and entitle the shareholders to certain tax deductions. The risk associated with this product is very high.
  • Preferred shares – preferred shares are issued by companies and usually entitle the shareholders to a fixed dividend. Preferred shares may also convertible to common shares at a pre-established price. The risk associated with this product ranges from moderate to high.

Fund Securities

  • Mutual funds – these are investment funds consisting of monies pooled by investors and administered by a Portfolio Manager on their behalf. These may easily be bought or resold at their asset value. The risk associated with this type of product varies from low to very high.
  • Exchange-traded funds (ETF’s) – selection of investments mirroring a market or bond index. The risk associated with this product ranges from low to high.
  • Leveraged exchange-traded funds – these are highly speculative short-term investments designed to double or even triple the daily performance of a stock index. They are unsuitable for investors who wish to hold their investments for more than a few days. The risk associated with this product is very high.
  • Income trusts – these are issued by a trust holding the securities or assets of one or several companies. Shares represent participation in the profits generated by the assets held by the trust. Income trusts are designed for the regular distribution of revenue to securities bearers. The risk associated with this product ranges from moderate to high.

Other products

  • Structured notes – structured notes are securities by which the issuer, generally a financial institution, acknowledges a debt. Duration usually ranges between five and 10 years. Some structured notes are capital- protected investments, whereas others offer no capital protection. Such securities do not always offer a fixed interest rate. Their performance may vary according to a benchmark portfolio related to one or more indices, goods, currencies, hedge funds, etc.
  • Options – options allow the bearer the right, but do not impose the obligation, to buy or sell an underlying asset at a fixed price during a determined period of time. The bearer of an option may sell it, exercise it or let it run its course. The risk associated with this product ranges from moderate to very high.
  • Subscription rights and warrants – these entitle the bearer to purchase additional shares at a fixed price for a determined period of time.
  • New issues – initial issue of shares or bonds by a company.

‘Know-Your-Client’ Information and Documentation
KYC rules include personal information about our clients as required by the regulators which must be updated by our clients when material changes occur. This information contains other critical information needed to ensure that the appropriate investments are recommended:

KYC information is collected by your IA or PM and noted on your ‘New’ Client Account Application (‘NCAF’). A copy of the completed NCAF and other KYC forms will be provided to you when your account is opened. Depending on the nature of the kind of account you have with GSI, you may receive additional documents that are relevant to your particular account type(s).

It is very important that our clients keep our IA’s and PM’s up to date at all times on their KYC information to ensure that their IA’s or PM’s can make the appropriate recommendations or investment decisions.

Suitability of Client Investments – The importance of KYC information
Before GSI makes any kind of investment recommendation or decision, GSI reviews our KYC information provided by our clients. This is a key reason for our clients to ensure that their KYC information is kept up to date at all times. For example, a client may have had a change in financial circumstances wherein a specific kind of an investment may or may not be suitable for the client. E.g. change in job, change in income, marital status, insider status etc.

A client’s Investment knowledge and experience are critical factors in determining suitability of an investment for a client. Investment knowledge and experience do change over time.

  • Poor/Nil – would include those individuals who have very limited or no knowledge of the basic attributes of investment securities;
  • Limited – experience would include those individuals who have had some investment experience but may not have a full understanding of the basic characteristics of the various types of securities and the degree of risk associated with these securities;
  • Good – experience would include those individuals who have either traded in or have some knowledge of the basic characteristics of investment securities, as well as basic understanding of the degree of risk and reward inherent in these types of securities;
  • Sophisticated – experience would include those individuals who have traded in most types of investment products. This would include knowledge of alternative investments (options, futures and other derivatives, commodities, private equity, hedge funds, etc.), speculative and short selling strategies and an appreciation of the risks and rewards involved in trading these securities.

A client’s Net Worth is calculated with the client’s and the client’s spouse’s (if applicable) financial assets and liabilities combined. Annual Income is normally separated between the client’s and the client’s spouse, and both are noted separately on the KYC form.

A client’s Risk Tolerance is linked to the client’s willingness and ability to accept risk and absorb investment losses within the client’s account. Risk tolerance is noted as within or parts of the following categories:

  • Low – I want to preserve my initial principal in the account, with minimal risk, even if that means this account does not generate significant income or returns and may not keep pace with inflation;
  • Medium – I am willing to accept some risk to my initial principal and tolerate some volatility to seek higher returns, and I understand I could lose a portion of the money invested;
  • High – I am willing to accept high risk to the initial principal, including high volatility, to seek higher returns over time, and understand that I could lose a substantial amount or potentially all of the money invested.

A Client’s Investment Objectives are based on the risk that the client is willing to tolerate. Investment Objectives are allocated based on the following categories:

  • Liquidity – The ability to quickly and easily convert to cash (cash or cash equivalent) all or a portion of the investments with little or no risk of loss;
  • Safety - You want to preserve the initial principal in the account, minimizing risk is of primary importance;
  • Income – You want to establish a source of periodic income. A small part of the portfolio could be in high quality income producing equity in order to counteract the effect of inflation;
  • Growth – Your investment objective is capital growth. Your portfolio can tolerate greater changes in market value in order to potentially increase the market value of your assets but 100% of the portfolio should not be invested in high risk trading strategies;
  • Speculative – You want to maximize the eventual return on your capital by investing all or most of your portfolio in high risk securities and/or trading strategies. You accept higher volatility in exchange for potentially greater investment returns.

A client’s Time Horizon is the length of time the client has to invest their monies until such time as the client needs to sell their investment. This is an important concept when trying to decide what kinds of investments the client should have in their portfolio. A client who does not need their money for decades can own a riskier portfolio compared to someone who needs their money next week. Time horizons can range from seconds, in the case of a day trader, all the way up to decades for a buy-and-hold investor. There is no ‘right’ time frame; this is dependent on the client’s individual objectives. GSI’s categories are as follows:

  • Under 3 years
  • 3 - 5 years
  • 6 - 10 years
  • 11 - 20 years
  • Over 20 years

Investment Suitability Assessment Process
Here is a brief summary of the process used by GSI to assess the suitability of your investments with regard to the information you have provided.

  • During your initial conversation with your IA and based on your answers to the questions in the account opening form, your IA will help you determine your investment objectives and time horizon as well as your risk tolerance. This information will also assist in establishing your global financial situation and investment knowledge. You will be given a copy of all the information obtained and documented at the time of account opening and whenever there are material changes to this information.

It is your responsibility to notify GSI without delay about any errors in the information contained in these documents.

  • Your IA will evaluate whether the proposed investment is suitable for you with regard to your overall portfolio, your time horizon and your personal and financial situation.
  • Using a highly sophisticated system based on specific criteria, the supervisor will evaluate the risk level of the transactions. The compliance department will also conduct a second-tier supervision.

Should you ask your IA to conduct a transaction which we deem to be unsuitable for you with regard to your information and investor profile, we will advise you not to carry out this transaction.

Your IA will explain the reasons why this transaction is unsuitable for you. If, in spite of this explanation, you still want to carry out this transaction, your IA will ask you for a letter stating that you have been advised against it and have been made aware of the associated risks. The IA and GSI reserve the right to refuse to carry out the transaction.

Frequency of Investment Suitability Assessment
In order to make sure that your investments remain suitable as time passes, your IA will assess the investments in your account at least once every year. In addition, GSI will assess the suitability of the investments in your account with regard to the criteria described above whenever:

Please note that an investment suitability reassessment will not necessarily be conducted in the event of significant market fluctuations. Feel free to contact your IA if necessary.

Should your IA find a discrepancy while assessing the suitability of your investments, he or she will contact you to discuss it. Such conversations may be documented as required by applicable regulations or in compliance with best business practices

Leverage/Margin Risk Disclosure
The use of leverage may not be suitable for all investors. Using borrowed money (whether through a margin account or some kind of leveraged investment product) to finance the purchase of securities involves increased risk over using cash to purchase a security. If a client borrows money to purchase the security, the client is responsible for the repayment of the loan and any interest that may be owed by the terms granted on the loan, regardless of whether the security declines in value. In the case of a margin account, the client may also be responsible for covering margin calls as required under the margin agreement, regardless of the price of the security. This use of leverage can result in investment losses which could exceed the amount of the money invested in the security.

Referral Arrangements
Referral arrangements may exist from time to time with GSI and other affiliates and other regulated and non-regulated entities. A referral arrangement is where a prospective client is referred to or from GSI by a party and that party or GSI may receive a referral fee. The purpose of referrals is to introduce our clients or potential clients to experts who are best suited to help them achieve their financial objectives.

If a referral arrangement is in place, a written disclosure will be provided to the client to acknowledge wherein the specific referring party will be disclosed along with the specific fee being received.

Client Reporting
GSI will send to our clients a number of reports to help you monitor the progress and performance of your investments:

  • Trade confirmation – GSI will send you confirmation for every transaction in your account itemizing relevant information connected to it. This confirmation will be sent on the next business day after the transaction.

It is the client’s responsibility to closely examine each confirmation and to inform us of any error or omission and of any transaction unauthorized by you within 7 days following receipt of the confirmation. It is our understanding that if you do not contact us within this time, you confirm and approve each transaction listed in the confirmation as well as the completeness and accuracy of other details connected to each transaction.

  • Account statement – GSI will send you a monthly account statement whenever a trade is conducted in your account no later than the 15th day of the following month. If there is no trade in your account, the account statement will be sent each quarter (March, June, September, December). This account statement provides you with an overall view of all your accounts plus an itemized description of each individual account. The types of account that you have are clearly identified as well as all of the securities and their market value, and an itemized list of all trade conducted including, in particular, purchases and sales of securities and dividends paid to your account. GSI obtains the market value of your securities from sources considered reliable, but GSI may not guarantee the accuracy of this information especially since market value is subject to market fluctuations

In addition, your account statement will indicate the purchase price, when available, or the market value of the security at the moment of transfer into your account.

It is your responsibility to closely examine each account statement and to inform us of any error or omission and of any transaction unauthorized by you within 30 days following receipt of the account statement. It is our understanding that if you do not contact us within this time, you confirm and approve each transaction listed in the account statement as well as the completeness and accuracy of all other information in the account statement.

Performance benchmarks
A client can review how your investments are doing by comparing the rate of return on the securities you hold to a performance benchmark. Your rate of return is affected by, among other things, changes in the value of your securities, dividends and the interest you earn, as well as when you make deposits and withdrawals.

There are many different benchmarks. When choosing a benchmark, pick one that reflects your investments. For example, the S&P/TSX Composite Index follows the share prices of the largest companies listed on the Toronto Stock Exchange. This index would be a good benchmark for assessing performance of a Canadian equity fund that invests only in large Canadian companies. It would be a poor benchmark if your investments are diversified in other products, sectors or geographic areas.

Note:

  • Keep in mind that benchmarks should be used as a guide only.
  • Benchmarks do not factor in commissions or other costs to invest and often don’t include low-earning assets that you hold to cash in case of emergencies. This means benchmark returns will seem higher than what you would earn on your account if you held the same securities as the index.
  • Benchmark rates of return are calculated using a specified method. For a better comparison, be sure this is how the rate of return on your account is calculated.
  • Remember that benchmarks are based on how a sample portfolio performs and that other factors, such as tax considerations, will affect your returns.

Please speak to your IA or your Portfolio Manager if you have questions about the performance of your portfolio or what benchmark(s) might be appropriate for you.

Performance reports
GSI provides you with the return on your investments an on annual basis. Your annual Investment Performance Report provides you with the annual performance of your accounts since inception with GSI using Time Weighted Rate of Return (TWRR) and Money Weighted Rate of Return (MWRR). The definitions of these performance calculations are:

  • Time Weighted Rate of Return: “TWRR” calculations measure the performance of all cash and securities in your account over time. The results of this performance calculation isolate the investment decisions made within your account and is independent of the timing of deposits and withdrawals which are not under the control of your Advisor. Therefore, your account’s TWRR can be compared against an appropriate benchmark for you to assess your performance.
  • Money Weighted Rate of Return: “MWRR” is the calculation method used to measure the performance experienced by you, the investor. The rate of return displayed above is influenced by the timing of deposits and withdrawals from your account. MWRR takes into consideration not only the amount of the cash flow but also the timing of the cash flow. This provides you a picture of how your account is performing considering decisions you have made to deposit or withdraw funds over a set period. MWRR should not be compared to a benchmark as they are not calculated the same way.

Please note that you may earn more or less than others may have made on the same investments or that you may read in market commentary due to differences in when you buy and sell securities

Fee and Commission Report: As noted under the topic fees above, on an annual basis we will issue a report to you detailing all fees and commissions paid by you to your Advisor and GSI. These fees and commission include but are not limited to: managed account fees, fees paid on fee-based accounts, commission paid on buys and sells of equities, commissions embedded in fixed income products, front end and back end commissions on mutual funds, trailer fees paid on mutual funds and exempt product, etc.

Account Documentation
After opening your account, GSI will supply several documents containing the information you need to play an active role in managing your accounts. These documents are as follows:

When you receive any account reporting from GSI, regardless of the type, please review in a timely manner to ensure that the information is correct. If you have noted any questions or concerns, please contact your IA or PM to review.

Conflicts of Interest
GSI provides retail investment advisory, portfolio management and investment banking services. As a member of IIROC, GSI must ensure effective policies and internal procedures are in place to effectively manage situations which could give cause to a conflict of interest.

A conflict of interest arises when the interests of different persons, particularly client interests and those of GSI or one of its employees (representatives, administrators, managers, associates, staff, agents) are incompatible or divergent. A conflict of interest may be existing, potential or apparent. More specifically, an employee, or GSI, is in a conflict of interest when he, she or it is in a situation of any nature which causes (existing conflict of interest), may cause (potential conflict of interest) or could be perceived to cause (apparent conflict of interest) this individual or it to act in his, her or its own interests or that of a related person against the client’s interests.

The general types of conflicts of interest which can occasionally arise are:

Role of an Investment Dealer
As an investment dealer, we are a financial intermediary. As is the common practice in the brokerage industry, sometimes we may be the party on the other side of the transaction (referred to as a “principal” trade) where we own the security we sell to you. On other occasions, we simply facilitate a transaction between you as our client and a third party on the other side of the transaction through an “agency” trade where we have no ownership interest in the security traded. In still other cases, we advise an issuer of securities on how to best raise funds by selling securities, while contemporaneously recommending that our clients buy those same securities.

GSI has policies and internal procedures in place to effectively address conflicts of interest. The organizational structure of GSI is designed to effectively control conflicts of interest.

Management of Conflicts of Interest
With the introduction of Client Focused Reforms effective June 30, 2021, when managing conflicts of interest, all conflicts must be addressed in the best interest of the client. In general, we take reasonable steps to identify existing and reasonably foreseeable material conflicts of interest between a client and the firm, or any individual acting on the firm’s behalf; we address all material conflicts of interest in the best interest of the client. We deal with and manage relevant conflicts as follows:

  • Avoidance - This includes avoiding conflicts that are prohibited by law as well as conflicts that cannot otherwise or effectively be addressed in the best interest of the client.
  • Control - We manage acceptable conflicts through means such as physically separating different business functions and restricting the internal exchange of information.
  • Disclosure - By providing our affected clients with a written disclosure of the conflicts of interest containing information about conflicts at account opening or in a timely manner thereafter, our clients are able to assess independently their significance when evaluating our recommendations and any actions we take.

Outside Activities
Conflicts can arise when IAs are involved in outside activities such as board members or pursuing outside business interests. GSI requires that all IAs and employees to promptly report and obtain approval prior to engaging in any outside activities. GSI will review the request for any potential conflicts of interest. In the event of a potential conflict of interest the approval may be subject to certain conditions or the outside activity may not be permitted if it cannot be appropriately managed and/or controlled.

Gifts and Entertainment
GSI has adopted an internal policy that is designed to ensure that IAs neither give or receive gifts or entertainment that are not within reasonable business practices. Nominal gifts cannot be given or accepted if, to a reasonable person, it could appear that the gift would influence a business decision.

Personal Dealings with Clients
Conflicts of interest can arise when an IA has personal financial dealings with clients, including, but not limited to, lending or borrowing from a client, accepting remunerations for services outside of GSI, and acting in the capacity of an Executor or Trustee. GSI has internal policies prohibiting IAs from engaging in, directly or indirectly, personal financial dealings with clients.

Related and Connected Issuers
GSI is required to disclose to client when a purchase of, sale of, or advice with respect to a related or connected issuer. This disclosure is provided when the recommendation is made and on the trade confirmation. In the case of a managed account, written consent from the client will be obtained for investments in connected or related issuers. GSI Investment Advisors receive the same compensation regardless of the issuer of the security. A detailed list of GSI’s related and connected issuers can be found in the Statement of Policies – Related Issuers and Connected Issuers included in the Relationship Disclosure Document.

Investment Advisor Compensation
GSI Investment Advisors are compensated based on one or a combination of the following:

  • commission derived from the sale and purchase of securities in accounts
  • fees derived from fee-based accounts
  • fees derived from portfolio management services

GSI’s compensation plans do not provide incentives to IAs to purchase or sell specific products or services including any particular type of account. For commission based accounts, our IAs are required to disclose to you prior to executing the trade any commissions or fees associated with the trade. Any shift to fee-based and managed accounts are reviewed to make sure they are in the best interest of the clients and on an ongoing basis. Any fees to be charged in these accounts on a per trade basis are included at the time of account opening. In these accounts, any products for which the IA would be compensated in addition to the fee-based or managed fee charged are not included in the monthly or quarterly fee charged. All purchases of new issues for clients whether in a commission, fee-based or managed account, are based on the best interest of the client and suitability assessment of the client. GSI Investment Advisors are not compensated for sales targets nor are they permitted to accept any compensation, payment or sales incentive directly or indirectly, from a person or company that is not GSI.

Referral Arrangements
GSI may enter into referral arrangements with other entities wherein GSI refers a client to such entity and receive a benefit or such entity refers a client to GSI and receives a benefit from GSI. The purpose of these referrals is to introduce clients or potential clients to persons/entities that are best suited to help the client with their financial needs. The detail of the referral arrangement including the benefits received and the other entity involved are disclosed to the client in writing at the time of the referral.

Account Types
Commission based accounts are charged fees on a transaction basis while fee-based accounts are charged a fixed fee as a percentage of the assets in the client’s accounts. The conflict of interest in offering these two types of accounts are address by the monitoring for suitability and the client’s investment needs and objectives.

This is an overview of a complex subject. Despite that, we believe the simplest control is the most effective – our client’s continued satisfaction and patronage. If a client ever has any questions or concerns, whether they involve conflicts of interest or anything else, the clients should never hesitate to say so and ask their Investment Advisor for an explanation and more information.

More Information
Canada has comprehensive and extensive securities regulatory rules and regulations, many of which are directed at protecting client and investor interests, including dealing with conflicts of interest. We suggest that you refer to the websites and publications of the provincial securities commissions through the Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) for more information on how Canadian securities regulations address conflicts of interest in order to safeguard the investing public.

Account, Product and other Administrative Fees and Charges
Existing regulations require GSI to disclose any fees and charges related to the acquisition, disposal and holding of your investments which you may or will incur, according to the type of account or service. These fees and charges may vary depending on the products and services offered. They may change with time, in which case you will be advised of the change in writing at least 60 days before the change is effective:

Your IA will provide you with a pre-trade cost disclosure. If information about actual commissions is not available, a reasonable dollar estimate will be provided.

Commission-based advisory accounts
In the case of commission-based advisory accounts, GSI will charge you a commission for every transaction in your account (sale or purchase) based on the following:

  • The amount of the transaction;
  • The value of the security;
  • The number of units traded;
  • The type of investment

NOTE: A minimum commission may be charged. The commission charged will appear on the trade confirmation which will be sent to you.

In the case of mutual funds, fund managers normally charge administration and transaction fees that are deducted from the returns of the fund. Here is a description of the types of administration and transaction fees that may be associated with investment transactions in mutual funds:

  • Front load – front load fees represent between zero and 5% of the amount invested. This is a negotiable commission paid to the IA.
  • Low load – low load fees are reduced brokerage fees paid by you to the IA by the mutual fund company at the moment of acquisition by a mutual funds investor. Fees charged usually decrease over time. They may vary from 3% upon redeeming in the first year after initial share funds purchase to 0% if redemption takes place three years or more after initial investment.
  • No load – with no load fees, no acquisition costs are charged upon purchase of units in a no load mutual fund. In general the MER of no load funds is higher than those of front load or deferred sale charge funds (see more information below).
  • Deferred sale charges – no commission is charged when you purchase mutual fund units. It is the fund company that pays a commission up to 5% of your assets to the advisor. Fees apply when funds are redeemed. They may represent up to 7% and decrease. For example, if redeeming your funds in the first year, you will pay 7% of the asset whereas you will pay nothing after six years.
  • Short-term trading fees – redeeming or exchanging shares from a fund against those from another fund in the 90 days following their purchase may incur short-term trading fees which may represent up to 2% of the amount received at the moment of redeeming or exchanging units between funds. Short-term trading fees are payable directly to the funds and do not apply to a fund’s cash equivalent.
  • Switch fees – apply to an exchange of units from one mutual fund to another of the same family. Trading fees may apply.

The management expense ratio (MER) represents a percentage of the assets in the funds that is deducted yearly of your assets to pay Portfolio Managers and meet operating costs such as research, analysis and marketing. The MER is indicated in the fund’s prospectus and is usually between 1% and 3%. Part of these charges, usually between 0.25% and 1.25% of your assets, is distributed yearly by the funds company to GSI and your IA as long as you are a shareholder of these funds; this is sometimes referred to as ‘trailer fees’. This commission compensates the ongoing service and advice offered by your advisor. Trailer fees are included in the management costs and the rate varies with the costs option (described above) that you have chosen.

Some costs may not apply in your case. We recommend that you read the prospectus for further information on charges and costs applicable to the investments you are considering and discuss the matter with your advisor.

New issues
No commission is charged when you purchase a New Issue. It is the issuer that pays a commission to your IA. Please refer to the prospectus or offering document in which fees and commissions are fully disclosed.

Fee-based advisory accounts
In the case of fee-based advisory accounts, fees are charged (monthly, quarterly) to your account. These are calculated using the Daily Average balance of the value of the account. Rates may vary up to a maximum of 2.0% yearly with a minimum of $120 monthly.

Managed accounts
For managed accounts, the fee schedule varies according to assets under management. Final fees can be negotiated with the client and noted in the managed account agreement. All managed accounts may be subject to a $15 transaction fee and administrative fees.

The following grid is a guideline for clients.
to 1 million: up to 2.25%
to 2.5 million: up to 1.75%
million and above: up to 1.50%

Administrative Fees
Service charges and fees can have a significant effect on investment returns and decisions. That’s why it’s our policy to minimize service charges and fees. In most cases, they represent only the costs we incur from other financial institutions. In all instances, they are competitive with industry standards.

REGISTERED PLANS
The Trustee for your Registered Plan is Natcan Trust Company.

Partial Plan Transfer* $ 100
Full Plan Transfer $ 175
Partial Plan Deregistration* $ 75
Full Plan Deregistration (including estates) $ 175
Swap Fee $ 25
Unscheduled RRIF Withdrawal $ 25
Shares held in Canadian Controlled
Private Corporation (CCPC) (one time)
$ 300

Registered Plan Annual Administration Fee>

Registered Savings Plan (RIF /LIF) $ 120
Registered Savings Plan (RSP, LIRA, RESP, RDSP) $ 100
TFSA $ 50

OTHER SERVICE CHARGES

Partial Investment Account Transfer-out $ 50
Full Account Investment Transfer-out $ 150
Certificate Registration (per cert.) $ 95
Rush Certificate Registration (per cert.)** $ 250
Deposit/Withdrawal at Custodian (DWAC) $ 75
Wire Transfer $ 25
Certified Cheque $ 20
Cheque - Not Sufficient Funds** $ 35
Cheque - Not Negotiable & Returned (Other) $ 35
Cheque Stop Payment $ 30
Ineligible Mutual Fund (per month) $ 10
Drip Enrollment (initial fee) $ 10
Inactive Account Fee (per year) $ 25

*Gravitas Securities Inc. reserves the right to charge up to $750 on partial transfers or partial de-registrations where the only positions left behind are illiquid securities/mutual funds.
**Not including third party charges.

MISCELLANEOUS FEES
Any miscellaneous fees for services provided by other financial institutions will be charged through at cost.

ALL FEES ARE SUBJECT TO SALES TAX WHERE APPLICABLE. RATES AND FEES ARE EFFECTIVE JUNE 1, 2016. CHARGES FOR OTHER GRAVITAS SECURITIES INC. MISCELLANEOUS SERVICES ARE AVAILABLE UPON REQUEST

Client Complaints
Gravitas Securities Inc. (GSI) takes all client complaints seriously. GSI has adopted the following procedures to enhance our open and honest review process for client complaints.

How does a client make a complaint?
A client has several options when making a complaint. Firstly, a client should contact their IA to resolve any concerns that they may have. Alternatively, the client may wish to contact the Branch Manager of their local GSI office: they may also contact the Compliance department in our Toronto Head Office. Complaints may be verbal or in writing.

What will GSI do once they have received a client complaint?
GSI will respond to all client complaints in writing. The letter to the client will include the contact information for the compliance department staff member who will be conducting the investigation and the client will also be advised as to the maximum time that the investigation may take. This will allow the client to follow the investigation and provide any information that they feel is relevant. Our compliance staff may also request additional information from the client to be able to conduct the investigation.

The client will receive a copy of Making a Complaint: A Guide for Investors (Part 1 of 2) and How Can I Get My Money Back? A Guide for Investors (part 2 of 2).These brochures will provide information on how to make a complaint to an IIROC Member firm and the other options that are available to the client.

How will GSI investigate a client complaint?
All client complaints are investigated by the compliance department. Information is collected with assistance from our Branch Managers, the staff member involved, the client, as well as from other sources deemed necessary.

How will the client be informed of the results of the investigation?
At the conclusion of the investigation, compliance will forward the client a letter outlining the following:

  • A summary of the complaint;
  • The results of the investigation;
  • GSI decision as to the results of the investigation;
  • A statement describing what options are available to the client if they are not satisfied with the results of the investigation.

GSI Designated Complaints Officer
GSI has designated our Chief Compliance Officer as our Designated Complaints Officer, who is responsible for the oversight of the customer complaint handling process. If you have any questions or comments about our complaint handling process, please contact our Designated Complaints Officer at:

Gravitas Securities Inc.
RBC Centre, 155 Wellington St. W, Suite 2920, Toronto ON, M5V 3H1
Attention: Complaints Officer

Statement of Policies - Related Issuers and Connected Issuers
The securities laws of the Canadian Provinces require securities advisers, when they trade in, or advise with respect to, their own securities or securities of certain other issuers to which they, or certain other parties related to them, are related or connected, to do so only in accordance with particular disclosure and other rules. These rules require securities advisers, prior to trading with or advising their customers or clients, to inform them of the relevant relationships and connections with the issuer of the securities. Clients and customers should refer to the applicable provisions of the securities laws of the province in which they reside for the particulars of these rules and their rights or consult a lawyer.

General
Under certain circumstances we may deal with or for you in securities transactions where the issuer of the securities or the other party to the transaction is this firm or a party having an ownership or business relationship with us.

Since these transactions may create a conflict or the appearance of a conflict between our interests and yours, we are required by securities laws to disclose to you certain relevant matters relating to the transactions. This statement contains a general description of the required disclosure. ‘We’ or ‘us’ or ‘the firm’ shall mean GSI Inc. for the purpose of this disclosure.

Key Concepts to Remember when Reading this Statement
‘Related Issuer’ is a person or company related to us if:

  1. the person or company issuing securities is an influential securityholder of us,
  2. we are an influential securityholder of the person or company issuing securities, or
  3. we, and the person or company issuing securities, are each a related issuer of the same third person or company.

‘Connected Issuer’ means an issuer or selling securityholder distributing securities:

  1. where the issuer or selling securityholder, or a related issuer of the issuer or selling securityholder, has a relationship with any of the following persons or companies that may lead a reasonable prospective purchaser of the securities to question if we are independent of the issuer or selling securityholder for the distribution:
    1. us;
    2. a related issuer to us;
    3. a director, officer or partner employed by us; or
    4. a director, officer or partner of a related issuer to us.

‘Influential Securityholder’ – An influential securityholder generally means a person, company or professional group that directly or indirectly:

  1. owns, controls or has the power to direct the voting of more than 20 percent of the votes to determine the directors of the issuer, or is a general partner of the issuer if the issuer is either a general or limited partnership;
  2. owns, controls or has the power to direct the voting of more than 10 percent of the votes to determine the directors of the issuer, and either
    1. is entitled to nominate at least 20 percent of the directors or has officers, directors or employees in common with and constituting at least 20 percent of the directors of the issuer or a related issuer; or
    2. the issuer is entitled to nominate at least 20 percent of the directors of their influential securityholder or has officers, directors or employees in common with and constituting at least 20 percent of the directors of the influential securityholder; or
  3. is owned or controlled by the issuer if the issuer has the p ower to direct the voting of more than 10 percent of the votes to determine the directors of a company that is an influential securityholder (other than a professional group), and either
    1. the company is entitled to nominate 20 percent of the directors of the issuer or has officers, directors or employees in common with and constituting at least 20 percent of the directors of the issuer or of the related issuer; or
    2. the issuer, together with its related issuers, is entitled to nominate at least 20 percent of the directors of the company or has officers, directors or employees in common with and constituting at least 20 percent of the directors of the company.

Required Disclosure
We must make certain disclosures where we advise you, or exercise discretion on your behalf with respect to securities issued by us, by a related party or, in the course of an initial distribution, by a connected party. In these situations, we must disclose either our relationship with the issuer of the securities, or that we are the issuer. We must also make disclosure to you where we know or should know that, as a result of our acting as your dealer or adviser, or of our exercising discretion on your behalf, securities will be purchased from or sold to us (as principal), an associated party or in the course of an initial distribution, from a related or connected party.

The following is a list of the time and manner in which these disclosures must be made:

  1. Where we exercise discretion to buy or sell securities for your account, the required disclosures will be contained in a statement which we prepare and send to you.
  2. Where we advise you with respect to the purchase or sale of securities, the disclosure must be made prior to our giving advice, either through the receipt of this statement or otherwise.

In addition, where we exercise discretion under your authority in the purchase or sale of securities for your account, we may not exercise that discretion for the types of transactions described above unless we have obtained your prior specific and informed written consent.

We may, from time to time, be deemed to be related or connected to one or more issuers for the purpose of the disclosure and other rules of the securities laws referred to above. We may have acted, and are prepared to continue to act, as an adviser with respect to securities of such related or connected issuers and to provide the full range of services customarily provided by us in respect of securities of other issuers. We shall carry out such services in the ordinary course of our business in accordance with our usual practices and procedures and in accordance with all applicable disclosure and other regulatory requirements.

GSI has a relationship with the companies listed in this statement. GSI, its directors, officers, partners, sales staff or other employees may from time to time provide to you advice about a security issued or managed by those listed companies. If you wish further information concerning the relationship between the firm and those listed companies, please contact us. This ‘Statement of Policies’ is updated annually and or when a material change occurs.

Additional Disclosure
GSI does not allow registrants that are directors, officers or partners of outside companies to give any financial advice on the outside companies of which the registrant is a director, officer or partner. GSI will notify all clients of the registrant in writing of the registrant’s conflict of interest.

Related and/or Connected Issuers
The following list of related and/or connected issuers to GSI is as of the date of this disclosure document. The following entities are related and/or connected issuers to GSI or who, by reason of its relationship with GSI, or one of its subsidiaries may be deemed to be related and/or connected to GSI. Each related and connected issuer are reviewed for conflicts of interest in the best interest of the client. Where the conflict of interest cannot be adequately managed, it is avoided.

  • Gravitas Securities Inc. provides asset management services and manages a portfolio of three different funds for which GSI receives compensation: Gravitas Special Situations Trust, Gravitas Select Flow-Through 2018, Gravitas Short Duration Flow-Through LP 2019.
  • 2242257 Ontario Inc., Global Illium Corp, Illium Capital Corp and FGF Hold Co. (all private holding companies) have a significant direct and indirect equity interest greater than 50% of GSI. A Director of GSI is also a director of FGF Hold Co.
  • Non-registered members of GSI’s Investment Banking team may be an officer or director of private and publicly traded companies that have a relationship with GSI.

Officer and Director Disclosure
Additionally, the directors or officers of GSI may act as directors or officers of other companies or organizations. GSI has policies and procedures that minimize the potential for conflicts of interest resulting from any such positions, including specific, up-front disclosure of such relationships when needed. GSI closely supervises the trading activity of any individual who is also a director of a public company for continuous compliance with the conflict-of-interest provisions to be in the best interest of the client. If the conflict cannot be managed adequately, it is avoided.

Required director and officer’s disclosure:
A Director of GSI is also a director of FGF Hold Co. (a private issuer)

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