401(k) Brokerage Services Terms
Updated February 6, 2024
- Introduction. Client understands and agrees that the Brokerage Services Terms govern all aspects of Client’s relationship with Betterment Securities and are incorporated by reference in the MSA.
- Execution, Clearing, and Custody. Betterment Securities will carry and maintain the Account and custody of the Assets credited thereof, and perform functions such as executing transactions and crediting of interest and dividends. The Plan shall retain ownership of all cash, securities, and other instruments in the Account. Client understands and agrees that Betterment Securities has entered into a clearing agreement with a clearing partner pursuant to which transactions within the Account will be cleared and settled by the clearing partner.
- Margin Account. Client understands and agrees that the Account is a no-loan margin account. All positions in, and trades executed for, the Account will be for cash settlement without any extension of credit and strictly limited in form and type to those available through the Program. The sole purpose of margin in the Account is to facilitate Betterment’s ability to sell securities and purchase other securities on behalf of Client within narrow time frames (“Substitutions”). A Substitution occurs when Betterment sells securities on behalf of Client and – after the time of trade but before settlement – uses the cash proceeds to purchase other securities. Client must deposit and maintain in cash or collateral 100% of the value of all Assets held in the Account. Betterment Securities will not extend Client or Participants credit for the purpose of purchasing securities and thus will charge no margin-based lending fees or interest. Client and Betterment Securities further understand and agree to the following:
- Client and Participants may not engage in any “Day Trading,” defined as the purchasing and selling or the selling and purchasing of the same security on the same day in a margin account.
- To help ensure Participants do not engage in any Day Trades, Participants are restricted from making more than one allocation change during market hours of each business day.
- If purchases or sales do not settle on schedule or for expected value as of the time of trade, Betterment Securities may sell the Assets in the Account to pay for Substitutions without prior notice to Client or Participants and at a loss or at lower prices than under other circumstances.
- Betterment Securities can liquidate or buy any security to cover positions in the Account at any time without demand for additional funds and despite notice that Client will provide additional collateral. Betterment Securities is not obligated to notify Client of such liquidations. Betterment Securities can liquidate any and all Assets in the Account and can cancel any open orders.
- Subject to applicable laws and rules, all Assets held, carried, or maintained in the Account may be pledged and repledged by Betterment Securities from time to time, without notice to Client, either separately or in common with other customers’ assets for any amount due in the Account, or for any greater amount as necessary to satisfy the Plan’s indebtedness, and Betterment Securities may do so without retaining into its possession or control for delivery a like amount of Assets.
- Betterment Securities has furnished to Client FINRA’s Margin Disclosure Statement, which is available at www.betterment.com/legal/margin-disclosure.
- Non-Sufficient Funds Policies. Betterment Securities reserves the right to cancel or cover any transaction which is the subject of a reclamation or other failure of an electronic funds transfer (an “ACH return”). Any fees imposed by Client’s bank in connection with an ACH return shall be the sole responsibility of Client, and not of the Betterment Entities.
Client understands that by making a contribution pursuant to this Section of the Brokerage Terms, Client is instructing Betterment Securities to purchase Assets for the Account. In the event that an ACH return takes place after such Assets have been purchased, Client understands that the Account may not be entitled to the Assets purchased in connection with the deposit, or to any benefits of ownership of such Assets. Client and Plan will have an obligation to Betterment Securities in an amount that is no less than the amount of the deposit that was the subject of an ACH return. Betterment Securities also reserves the right to restrict Client’s and Participants’ ability to withdraw funds until such time as it is reasonably assured that all deposits or other items in Client’s account have cleared. - Account Contributions and Distributions. Client understands and agrees that Betterment Securities may request that Participants establish a linked checking account for purposes of processing ACH distributions from Participant Accounts. Client understands and agrees that ACH transactions may take up to five business days and funds transferred may not be credited to the linked checking account or otherwise available to Participants during processing. Betterment Securities anticipates that distributions will be made in cash, but at its discretion may make distributions in kind. Subject to applicable law, Betterment Securities, in its sole discretion may impose a period of time during which funds may not be available for trading or distributions; permit the transfer of funds into or out of the Account in other forms or via alternative means; and/or refuse certain types of additions of funds to the Account.
Client understands that any contribution to, or withdrawal or distribution from, the Account may trigger buy, sell, or rebalancing transactions.
Client represents and warrants that no funds deposited into the Account are derived from, or will be used to promote the conduct of, any unlawful activity.
Subject to the terms of the Plan document, applicable laws and rules, and the terms of the Services Agreements, Client (or a Participant acting as Client’s agent) may withdraw, or request a distribution of, an amount up to the current market value of the Account, or a Participant Account, not including fees that are due. On receipt of an ACH disbursement request, Betterment Securities will transmit payment instructions to the applicable bank. - Requesting Certificates. Client authorizes Betterment Securities to register any Assets in the Account in the name of Betterment Securities or any other nominee, including sub-custodians, or to cause the Assets to be registered in the name of, or in the name of any nominee of a recognized depository clearing organization. Plan’s ownership of the Assets is reflected in Betterment Securities’ records. Without abrogating any of Betterment Securities’ rights under the Brokerage Services Terms, and subject to prior satisfaction of any indebtedness Client or Plan may have to Betterment Securities, the Account is entitled to receive physical delivery of fully paid securities from the Account. On Client’s written instructions, and on paying any applicable fees up to $100 as prescribed by Betterment Securities in its sole discretion, any certificate that is capable of being produced and obtained by Betterment Securities will be sent to Client on request. Client understands and agrees that Betterment Securities cannot transfer or deliver fractional shares of any security.
- Restrictions on Account Services. Client understands that Betterment Securities may place trading, disbursement, services, or other restrictions on the Account, or be required to liquidate Assets in the Account, for reasons including court order, tax levy, garnishment, request of a government agency or law enforcement authority, or other legal obligation.
- Transfer of Assets. In lieu of cash payment, Client may request a transfer of Assets to an account Client has established with another broker-dealer or custodian or with Betterment Securities. Transfer requests will be in a form determined by Betterment Securities. Betterment Securities may reject the transfer request in its discretion. Betterment Securities is not liable for any Losses Client or Plan may sustain in connection with the Assets in the Account between the time that it decides to reject a transfer request and Client’s receipt of notice of the rejection. A transfer request generally cannot be amended or canceled after Betterment Securities receives and initiates the transfer. Betterment Securities will not be liable for any Losses that arise out of or relate to an attempt to amend or cancel a transfer request, and Client agrees to indemnify and hold Betterment Securities harmless from any Losses arising out of an attempt to amend or cancel a transfer request. Client should be aware that Assets held in the form of fractional shares within the Account may not be transferrable in kind.
- Advisory Services and Trading Authorization. Without limiting any other provision of the Brokerage Services Terms, Client understands and agrees that the Account is non-discretionary, and Betterment Securities is authorized to accept and act only upon the instructions of Betterment with respect to the Account. CLIENT ACKNOWLEDGES AND AGREES THAT BETTERMENT SECURITIES DOES NOT SOLICIT SECURITIES TRANSACTIONS AND IS NOT RESPONSIBLE FOR DETERMINING THE SUITABILITY OF INVESTMENT CHOICES.
- Trading and Transaction Provisions.
- Transaction Confirmations and Account Statements. Client must notify Betterment Securities in writing of any objection to the terms of a confirmation within three (3) days after receipt of the confirmation. Betterment Securities is entitled to treat the terms of the confirmation as accurate and conclusive unless Client objects in writing within three (3) days of receipt. If Client objects to a transaction for any reason, Client will make reasonable best efforts to limit any Losses that may result from such transaction and to assist Betterment Securities’ efforts of the same. Client understands and agrees that unless such action to limit Losses is taken, Client will bear sole responsibility for any and all further Losses that may occur thereafter and which could have been prevented by reasonable mitigation measures that Client failed to take, even if Client’s objection to the initial transaction is ultimately determined to be valid.
Client agrees that Betterment Securities is not obligated to provide any trade status report other than the official confirmation. Client must notify Betterment Securities of any objection (including any claim of improper transfers, omissions, other errors, or fraudulent occurrences) to the information contained in the Account statement (excluding securities transactions, which are covered by transaction confirmations as stated above) in writing within thirty (30) days after Client’s receipt of the statement. - Applicable Rules and Regulations. In no event will Betterment Securities be obligated to effect any transaction that it determines, in its sole discretion, would violate any federal or state law, rule, or regulation or the rules or regulations of any regulatory body or self-regulatory organization.
- SIPC. Betterment Securities is a member of the Securities Investor Protection Corporation (“SIPC”). SIPC currently protects the Assets in each of Client’s Accounts and in each Participant Account up to $500,000, including $250,000 for claims for cash. (Please note that money market fund balances are not considered cash for this purpose; they are considered to be securities.) Visit www.sipc.org or call (202) 371-8300 for more information, including a brochure on SIPC protection. SIPC coverage does not cover fluctuations in the market value of the Account’s investments.
- Order Aggregation. Client understands and agrees that Betterment Securities may receive aggregated orders for the sale or purchase of securities for the Account with orders for the same security for other clients or for Betterment’s own account, and when Betterment Securities executes aggregated orders, Client or Participants will receive the average price per unit of the aggregated trade.
- Dollar Based Transactions and Fractional Shares. Client understands that, subject to applicable requirements, Betterment Securities and Betterment may report holdings and transactions in Client’s Account in terms of either U.S. Dollars or shares. As a consequence of dollar-based transactions, Client will hold fractional share interests in securities. Client understands and agrees that fractional shares are not marketable outside the Betterment platform or transferrable to another brokerage account.
- Order Handling. Client understands that, subject to the terms of an order and applicable laws and rules, the method of execution of each order is in the sole discretion of Betterment Securities. Orders that are accepted by Betterment Securities will be transmitted by Betterment Securities or its agent to the appropriate exchange or other market for execution. Certain orders, at the discretion of Betterment Securities or its agent, may be subject to manual review and entry, which may cause delays in the execution of orders on behalf of the Account and may cause orders on behalf of the Plan to be executed at prices that are significantly different from price conditions that existed when the order was entered on behalf of the Plan. Betterment Securities reserves the right in its sole discretion to decline to accept any order without advance notice.
- Purchases. Client agrees that the Plan and its related Trust shall be responsible for paying for all Assets purchased in the Account. Betterment Securities requires that the Account contain available funds in an amount equal to or greater than the purchase price of the Assets prior to the trade date.
- Sales. Betterment Securities requires that an Asset be held in or due to the Account prior to the acceptance of a sell order with respect to such Asset. Any order accepted without negotiable certificates or positions in the Account will be subject, at Betterment Securities’ sole discretion, to cancellation.
- No Cancellation. Client understands and agrees that orders are subject to immediate execution and cannot be canceled or modified after they are placed with Betterment Securities by Betterment.
- Order Routing. Consistent with the overriding principle of best execution, Betterment Securities or its agent, using a computerized system, routes orders for listed equity securities to market centers for execution. Pursuant to Rule 606 of the Securities Exchange Act of 1934, quarterly reports that disclose the market venues receiving Betterment Securities’ order flow in covered securities, as well as the material aspects of each relationship, will be made available on the Website.
- Disclosures to Issuers. Betterment Securities is required, upon request, to disclose to an issuer the name, address, and position of each customer who is a beneficial owner of that issuer's securities unless Client objects in writing. Betterment Securities maintains this practice as part of it compliance with Rule 14b-1 under the Securities Exchange Act of 1934.
- Transfer Sweep Program. Client hereby elects for the Account to participate in the Transfer Sweep Program (the “TSP”) as described in this Section. Betterment Securities utilizes the TSP to automatically deposit, or “sweep,” Plan Assets into a demand deposit account at each TSP Bank (each, a “TSP Deposit Account”) at one or more FDIC-insured banks (each, a “TSP Bank”) pending the investment of those funds into securities or other investments. Funds eligible for the Transfer Sweep Program (“Eligible TSP Funds”) include, but are not limited to, funds arising in connection with deposits, contributions, withdrawals, distributions, dividends, payroll and compliance corrections. Eligible TSP Funds also include suspense and forfeiture funds that are the result of circumstances including but not limited to payroll corrections, compliance corrections, and forfeiture of unvested Participant funds. Client understands and agrees that Eligible TSP Funds will typically be held in a TSP Deposit-Account temporarily, for 5 business days in the case of contributions and dividend reinvestment and 1 business day in the case of distributions, but that the amount of time could vary for reasons outside of Betterment’s control. In addition, eligible TSP Funds could remain in the TSP Deposit-Account on the direction of, or awaiting action by, Client or Participants, including but not limited to, funds requiring investment direction or approvals from Client, uncashed Participant distributions, unused and unallocated forfeiture funds, payroll processing delays, and fraud or other operational holds.
By opening a brokerage account, Client authorizes Betterment Securities to deposit Eligible TSP Funds contributed to or received into the Plan Account into a TSP Deposit Account at one or more TSP Banks. A list of the TSP Banks and additional related disclosures are available at: www.betterment.com/legal/TSP.
Betterment Securities will act as Client’s agent in placing Eligible TSP Funds into the TSP Deposit Account and will hold the TSP Deposit Account as Client’s custodian. For purposes of Article 8 of the Uniform Commercial Code as included in applicable state law (the “UCC”), Betterment Securities is Client’s securities intermediary for, and will treat as financial assets, each TSP Deposit Account.
TSP Deposit Accounts do not bear interest. Each TSP Deposit Account is an obligation of the TSP Bank and not Betterment or Betterment Securities. Client will not have a direct relationship with a TSP Bank. Information about a TSP Deposit Accounts may only be obtained from Betterment.
Deposit balances in a TSP Deposit Account are insured by the FDIC, an independent agency of the U.S. Government, up to $250,000 for all deposits held in the same insurable capacity (e.g., individual, joint, IRA, etc.). In the event a TSP Bank fails, a TSP Deposit Account is insured up to $250,000. Betterment Securities may deposit funds in a TSP Bank in amounts exceeding the FDIC insurance limit.
All deposits that the Plan holds at a TSP Bank – together with any non-TSP deposits the Plan may have at the same TSP Bank, which include deposits arising in connection with similar programs offered to Client by Betterment Securities, as well as savings and checking accounts, money market deposit accounts, and CDs issued directly to the Plan by the TSP Bank – will be aggregated for the purpose of determining available FDIC insurance. If the Plan’s total funds on deposit at a TSP Bank exceed the applicable FDIC insurance limit, the FDIC will not insure the Plan’s funds in excess of the limit.
Neither Betterment nor Betterment Securities is responsible for monitoring Client’s deposits in any TSP Bank to determine whether it exceeds the limit of available FDIC insurance. Client is solely responsible for monitoring the total amount on deposit with each TSP Bank (including amounts in other accounts at the TSP Bank held in the same right and legal capacity) in order to determine the extent of deposit insurance coverage available on those deposits. If Client is a trustee, Client is responsible for determining the application of the insurance rules for the trust’s beneficiaries.
In the event of a bank failure, and FDIC deposit insurance payments become necessary, there is no specific time period during which the FDIC must make insurance payments available, and Client may not earn interest on Client’s deposits from the time a Deposit Bank is closed. Client understands and acknowledges that Client may be required to provide certain documentation to the FDIC before insurance payments are made.
For more information regarding FDIC deposit insurance, please see our FDIC disclosures.
Assets held in the Plan’s brokerage account (excluding funds on deposit with FDIC-insured banks) are not insured by the FDIC. Assets held in the Plan’s brokerage account are protected by SIPC in accordance with the terms of SIPC for up to $500,000.
For more information about SIPC coverage and additional securities coverage, contact Betterment. Client may also obtain information about SIPC coverage, including a brochure that describes SIPC and SIPC coverage, by accessing the SIPC website at www.sipc.org or contacting SIPC at (202) 371-8300.
Neither Client nor Participants pay any fees in connection with the TSP. Betterment Securities receives fees from TSP Banks based on certain balances maintained in those accounts. Client understands and agrees to Betterment Securities receiving payments from TSP Banks calculated based on the federal funds rate and the amount of certain Eligible TSP Funds in the TSP Deposit-Account on a given day. For more information, please review Betterment’s Form ADV.
All transactions in a TSP Deposit Account will be reflected on Participants’ periodic brokerage account statement. Betterment Securities, and not the TSP Bank, is responsible for the accuracy of information relating to TSP Deposit Accounts on a statement.
Betterment Securities reserves the right to make changes to the TSP with prior notice to Client.
Client may obtain publicly available financial information concerning the TSP Banks at www.ffiec.gov/nic or by contacting the FDIC Public Information Center by mail at L. William Seidman Center, Virginia Square, 3501 North Fairfax Drive, Arlington, Virginia 22226 or by phone at (703) 562-2200. Betterment Securities does not guarantee in any way the financial condition of the TSP Banks or the accuracy of any publicly available financial information concerning the TSP Banks.
- Transaction Confirmations and Account Statements. Client must notify Betterment Securities in writing of any objection to the terms of a confirmation within three (3) days after receipt of the confirmation. Betterment Securities is entitled to treat the terms of the confirmation as accurate and conclusive unless Client objects in writing within three (3) days of receipt. If Client objects to a transaction for any reason, Client will make reasonable best efforts to limit any Losses that may result from such transaction and to assist Betterment Securities’ efforts of the same. Client understands and agrees that unless such action to limit Losses is taken, Client will bear sole responsibility for any and all further Losses that may occur thereafter and which could have been prevented by reasonable mitigation measures that Client failed to take, even if Client’s objection to the initial transaction is ultimately determined to be valid.
- General and Miscellaneous Provisions and Disclosures.
- U.S. Economic Sanctions. The Account may be subject to U.S. economic sanction and embargo laws. Client represents that none of Client, Participants, the Plan, or the Plan’s trustees has been designated by the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC") as a Specially Designated National or blocked person, Client has no reason to believe that Client, Participants, the Plan, or the Plan’s trustees would be considered a blocked person by OFAC, and Client resides in the United States. Client also represents, warrants and covenants that Client is not employed by, acting as agent of, or partially owned or controlled by a government, a government-controlled entity or a government corporation. Client understands that if the application is deemed to fall under any OFAC prohibition, the Account may be declined or restricted from certain activity.
- Power of Attorney. Client agrees and hereby irrevocably appoints Betterment Securities with full power as Client’s true and lawful attorney-in-fact, to the full extent permitted by law, for the purpose of carrying out the provisions of the Brokerage Services Terms and taking any action and executing any instrument that Betterment Securities deems necessary or advisable to accomplish the purposes of the Services Agreements.
- Proxies. Client understands and agrees that Betterment Securities earns revenue from companies that issue proxies, for facilitating the processing and delivery of the proxies to Betterment’s Clients. The revenue earned by Betterment Securities is not contingent on whether or how proxies are voted by Betterment, and the identity of funds and other securities that Betterment includes in the Account is not influenced by these payments.
- Electronic Funds Transfer. Client acknowledges receipt and acceptance of the “Electronic Funds Transfer Rights and Error Resolution” available at www.betterment.om/legal/work/401k-electronic-funds-transfer-rights.
- Complaints. Complaints about your Betterment Securities brokerage account may be directed to Betterment Securities at support@bettermentsecurities.com, via phone by calling 646-600-8263 and requesting to speak with a representative of Betterment Securities, or by mail at 8 West 24th Street, 6th Floor, New York, NY 10010.