general@GravitasSecurities.com
+1-416-367-0999

Relationship Disclosure

Gravitas Securities Inc. (“GSI”), formerly “Portfolio Strategies Securities Inc.” or “GSI” has recently been reorganized and change its name. GSI is providing this document to describe what a reasonable investor needs to know about GSI and the products and services that we offer.

GSI is registered as an investment dealer and an investment fund manager in: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec. We are members of the Investment Industry Regulatory Organization of Canada (IIROC), the self-regulatory organization that oversees all investment dealers in Canada, and of the Canadian Investor Protection Fund (CIPF).

GSI has registered affiliates in the United States to serve US clients. The first affiliate, Gravitas Wealth Advisors, LLC, is registered by the Securities and Exchange Commission (SEC) as a Registered Investment Advisor and is registered to conduct business for US clients in the states of New York and California. The second affiliate, Gravitas Capital International., is registered by the Financial Industry Regulatory Authority Inc. (FINRA) as a broker dealer and can conduct business for US clients in various states, including the State of New York.

1. Conflicts of Interest

Conflicts of interest may arise when GSI’s Investment Advisors, Portfolio Managers, Investment Bankers or employees are in a situation that may or could lead them to directly or indirectly choose between the interests of GSI, their clients or their own personal interests, business interests or those of a person with whom they are linked in any way whatsoever.

In the event there is a real, potential or perceived conflict of interest, the interests of the client must always come first.

Determining whether a conflict of interest is material depends on the facts of each case. However, where the conflict is so significant that there is a reasonable likelihood that a client would want to know about it, this would be considered a material conflict of interest that must be addressed and disclosed or avoided.

GSI requires its management, investment advisors, portfolio managers and employees to disclose conflicts of interest in advance to its clients.  GSI requires all registrants who are dually licensed or approved by GSI to have outside business activities outside the firm (for example, to sell insurance, prepare tax returns or another business role) to provide to their clients a Dual Occupation Disclosure form advising clients of a potential conflict of interest.

See our Conflicts of Interest Statement below for disclosure of particular business relationships.

2. Multiple Registrations

In acting as an investment dealer and investment fund manager, GSI will exercise our powers and duties honestly, in good faith and in the best interests of our clients, and will devote such time and attention and exercise such degree of care, diligence and skill as a prudent and experienced investment counsel would exercise in comparable circumstances (the “Standard of Care”).

Some of our Investment Advisors may hold multiple licenses and may act both as a registered representative with GSI as an investment dealer and as a licensed insurance agent to sell insurance with a sponsoring insurance company.  In such instances, your Investment Advisor will provide you notice of dual occupation and dual registration.

3. Acting as an Investment Dealer

GSI will only act as an investment dealer and investment fund manager in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec. In agreeing to act as your dealer with respect to any investment, we are required to assess the suitability of investments for you prior to executing the transaction on your behalf or at any other time.

4. Retail Wealth Advisory Services

GSI offers clients the following services:

  • Transaction accounts
  • Managed accounts

GSI may offer additional services as they are developed.  We will inform our clients about new offerings.  Please ask your Investment Advisor.

5. Products

Your Investment Advisor or Portfolio Manager is required to “Know Your Products” (KYP) that GSI is approved to offer.  Your Investment Advisor or Portfolio Manager will explain the GSI investment products that we offer and explain to you the characteristics and risks associated with these investments.  Not all Investment Advisors are qualified to offer all our products and services.

GSI offers the following approved products:

  • Cash and cash equivalents such as T-Bills and money market instruments
  • Fixed income, GICs, bonds
  • Investment funds including mutual funds, labour sponsored funds and exchange traded funds
  • Equities
  • Investment banking for accredited investors including private placements and mergers & acquisitions transactions
  • Other products (e.g. Principal Protected Notes, approved Hedge Funds)

GSI may offer additional products as they are developed.  We will inform our clients about new offerings.  Please ask your Investment Advisor or Portfolio Manager for details.

6. Fees

Your Investment Advisor or Portfolio Manager will provide you with a Fee Schedule for your specific account.  In addition, you may also be charged additional fees relating to the operation of your account.

7. Suitability

GSI Investment Advisors and Portfolio Managers are required to regularly assess the suitability of your accounts.  Our Investment Advisors and Portfolio Managers will ask a series of questions to all their clients to satisfy the “Know Your Client” (KYC) obligation and equip themselves to conduct a proper suitability assessment.  Ongoing suitability is performed for all GSI managed accounts.

Your Investment Advisor will collect information on your net worth, age and investment experience and will meet with each of you to discuss other information and to assess your risk tolerance and investment objectives.

Your Investment Advisor will meet with you to assess your KYC in order to make suitable investments for your account:

  1. Financial situation. You will be asked to describe your current and future income as well as all your financial assets (e.g. investments, home, cash, fixed) and your liabilities

(e.g. mortgages, loans).

  1. Investment knowledge. You will be asked to describe your level of experience with investing and investment products.
  2. Investment objectives. You will be asked to describe the specific financial goals that you want to achieve with your investments.
  3. Time horizon. You will be asked to set a time period during which you want to achieve your financial goals and when you will need to use the assets in your account.
  4. Risk tolerance. You will be asked what type of risk you are willing to incur and the impact that potential volatility in the markets would have on the assets in your account and the investment income or growth from those assets.
  5. Account composition and risk level. You will also be asked to discuss your risk tolerance for the overall holdings in your account and the risks associated with each of the assets in your account portfolio.

Each client’s investment objectives and risk tolerance are two separate but related factors; each factor must be assessed based on the client’s financial and personal circumstances and must be reasonable in light of those circumstances.

Your Investment Advisor will review the reasonableness of the information that you provide during the account opening, account transfer and account approval process.  Prior to placing orders for you, depositing investments or recommending changes to your account, your Investment Advisor will review your KYC to determine if your trades and investment products are suitable for you.

Your Investment Advisor will be required to update your KYC account information regularly and will need to review suitability of your KYC before placing any orders from you or from recommending any trades or changes to your account.  Certain trigger events such as a change of your investment advisor or market fluctuations may also require KYC updates to your account information.

If there are any material changes to your personal circumstances that will change your KYC, please inform your Investment Advisor as soon as possible so your KYC will be updated to reflect these changes and, if necessary, your account may be rebalanced to meet the revised suitability of the updated KYC.

8. Reporting

There are two sources of reporting.

  1. Statements, trade confirmations and related tax slips come from GSI’s carrying brokers (National Bank Correspondent Network and B2B Bank Security Services Inc.).
  1. Unofficial quarterly portfolio reports produced from GSI’s portfolio reporting system for investors participating in programs such as Managed Accounts.

9. Performance Benchmarking
An investment benchmark is a standard against which the performance of your investments is compared.  GSI does not currently perform firm-wide performance benchmarking.  GSI is preparing for account performance reports requirements which will be introduced in 2015.

10. Fairness Policy

GSI maintains standards to ensure fairness in the allocation of investment opportunities among its clients.  GSI’s policy is that no single account or type of account will receive preference in the allocation of investment opportunities.

  • Client and Pro – Non Employee accounts will always take precedence over Pro – Employee accounts.
  • If the pro rata amount trade size is less than a board lot than the account will receive reduced priority when allocating
  • The amount of fees and commissions will have no bearing on the allocation.

Blocks

When orders for more than one account are entered as a combined order, and transactions are executed at varying prices, GSI will endeavour to treat all clients on a basis that is fair and reasonable in the context of the nature of the particular transaction and the transaction costs.  This may include calculating a weighted average execution price and commission to be attributed to all accounts having orders included in the combined order.  For greater certainty, when trades are bunched or blocked, the policy of GSI is to allocate amongst clients on a pro rata basis.  GSI will endeavour to ensure that orders and modifications or cancellations of orders are recorded and are time-stamped.

Partial Fill Block Order

When orders for more than one account are entered as a combined order and less than the total order is executed as a block, GSI will generally attempt to make pro-rata allocations on the basis of order size.  GSI will also take into consideration:

  • the proportion of the portfolio (or portfolio section) that the security represents,
  • the weight of the industry or security type in the portfolio (or portfolio section), and
  • the cash reserve position in the portfolio (or portfolio section).

When orders for more than one account are entered as a combined order and the transactions are all executed at the same price, each client account will be given the same execution price.

Filling an IPO Order

When orders for an initial public offering are entered for more than one account and are completely or partially filled, GSI will attempt, to the best of its ability, to allocate the filled orders on a pro rata basis according to the proportion of the total of all orders submitted by GSI for that initial public offering and GSI will attempt, to the best of its ability, to calculate a weighted average execution price and commission to be attributed to all accounts included in orders for that initial public offering. Subject to market conditions and stock exchange procedures, GSI will use its best efforts to ensure that orders are processed and executed on a first-in, first-out basis. The foregoing procedures will be revised from time to time in keeping with changes in regulatory requirements and industry practices. In the event of any such revision, GSI will, as required, furnish a copy of the revised policies to each client and file it with the appropriate regulatory authority.

GSI may decide to use other allocation models in order to allow more clients to participate in an oversubscribed issue. In some cases where demand is very high, GSI may introduce a ceiling or maximum number of shares per person, or may allocate on a pro rata basis.

11. Conflicts of Interest Statement

Securities laws and regulations require Portfolio Strategies Securities Inc. (GSI) to have policies and procedures in place to address the handling of conflicts of interest.  A conflict of interest or a potential conflict of interest may arise where GSI is in a position to take an action or decision where the result would benefit the firm at the client’s expense.

The purpose of this statement is to:

  • Describe the types of business relationships that present potential conflict of interest situations.
  • Provide transparency by disclosing those business relationships that GSI has.

Terminology Describing Business Relationships

Where we act as your broker, advise you, or exercise discretion on your behalf with respect to securities issued by us or a related party or a connected party in the course of distribution, we must disclose to you our relationship with the issuer of the securities. Following is a brief explanation of the types of business relationships that are described as related and/or connected. If you wish to read the full regulatory definitions of the terms “related issuer” and “connected issuer”, please refer to National Instrument 33-105: Underwriting Conflicts.

  • An issuer is related to us if they are an influential security holder of GSI, if GSI is an influential security holder of theirs, or if we have a common influential security holder.
  • An issuer is connected to us if the relationship is such that a reasonable prospective purchaser of the issuer’s securities might question the independence of the parties for purposes of the distribution.
    • For example, Principals of GSI may accept officer positions and/or directorships from companies unrelated to GSI; doing so, that company would be considered to be a “connected issuer” to GSI under relevant securities law.
  • A party is associated with us if we or an influential security holder of GSI, beneficially own, directly or indirectly, securities carrying more than 10% of the voting rights of the party.

GSI Corporate Information

GSI has four lines of business: retail wealth advisory, investment banking for corporations and asset management.  We recently terminated our proprietary mutual funds.  Conflicts of interest may arise from all areas of GSI business, though more likely when a client is being advised to invest in one of the firm’s investment banking opportunities or asset management products. GSI has adopted appropriate policies and procedures to address conflicts of interest.  For example, firm policies require dealers and advisors to disclose any relevant relationships and connections prior to advising or trading on behalf of clients.

The following statement outlines, as at September 30, 2014, certain relationships that present potential conflicts of interest, which may arise between GSI and the client. Please note the information provided in this statement sets out situations most likely to give rise to a conflict of interest situation and as such is not exhaustive. Further information is available directly from your advisor and will be made available as described below in the section: Where Potential Conflicts are Disclosed.

Related and Connected Issuers

  • Gravitas Wealth Advisors, LLC (formerly, Portfolio Strategies Wealth Advisors, LLC) is registered by the SEC as a Registered Investment Advisor and is registered to conduct business for US clients in the states of New York and California.
  • Gravitas Capital International Inc. (formerly, P.S. Securities (USA) Inc.) is registered by FINRA as a broker dealer and can conduct business for US clients in various states, including New York.
  • Foundation Mutual Funds launched in October 2013 were terminated effective December 31, 2015 and March 24, 2016.
  • Gravitas Financial Inc. (CNSX: GFI) is an integrated financial and advisory services public company operating various affiliated subsidiaries. GFI and Ilium Corp. through their jointly held holding corporation, Gravitas International Corporation (“GIC”) have a significant indirect equity interest holding of greater than 50% of GSI. A Director of GSI is also director of GIC. GSI sometimes acts as a portfolio manager or advisor to GFI in selected corporate finance initiatives.
  • Portfolio Strategies Corporation (PSC), a mutual fund dealer headquartered in Alberta, is a sister company to GSI.
  • The Mint Corporation is connected to GSI, having common ownership and a director of GSI is on its Board.

Where Potential Conflicts are Disclosed

If we do act for you in a transaction that presents a conflict of interest, the potential conflict will be disclosed to you, depending on the nature of the transaction:

  • We will notify you up-front about our relationships when giving you advice with respect to the purchase or sale of securities of related and/or connected issuers
  • In the event of GSI and/or one of the principals being involved in a new issue, the Prospectus or Offering Memorandum will describe the nature of the relationship with the issuer.

GSI policies and procedures require full disclosure for potential conflict of interest situations and all principals know to be diligent for when such situations may occur, to ensure the appropriate information is provided to and acknowledged by potential investors.

Disclosure of other Relationships

Additionally, the principals and representatives 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 to ensure continuous compliance with the conflict of interest provisions.

Certain of GSI directors and officers are also directors of the following publicly listed companies:

  • Gravitas Financial Inc. (CNSX: GFI)
  • The Mint Corporation (TSX: MIT-V)
  • NatureBank Asset Management Inc. (TSX-V: COO)

12. Documents we will provide to you
In addition to this Relationship Disclosure Document, we will provide each of our clients with the following documents:

  • A signed copy of your New Account Application Form including your Know Your Client information
  • Any conflicts of interest disclosures (e.g. Dual Occupation Disclosure Form)
  • GSI Fee Schedules
  • CIPF Brochure
  • IIROC’s “An investor’s guide to making a complaint”
  • Investor Protection for Clients of IIROC Member Firms Brochure
  • Strip Bond Disclosure Document (if applicable)

13. Complaints or Questions?

If you have any complaints or questions about dealing with GSI, please phone or write to us at the contact information provided below. GSI has a documented process to deal with client complaints and we seek to resolve any complaints through that process. We provide you with a copy of IIROC’s brochure, “An investor’s guide to making a complaint”, which summarizes the firm’s requirements for responding to investor complaints.  Additionally, GSI is a participant in the Ombudsman for Banking Services and Investments (OBSI), an independent service for resolving investment disputes.

Gravitas Securities Inc.
(formerly “Portfolio Strategies Securities Inc.”)
333 Bay Street, Suite 1700
Toronto, Ontario, M5J 2N7
T: +1-416-367-0999
general@GravitasSecurities.com
www.GravitasSecurities.com

 

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