FOLIO INVESTMENTS, INC. · FOLIO INVESTMENTS, INC. CRD# 48015 SEC# 8-52009 Main Office Location...

BrokerCheck Report

FOLIO INVESTMENTS, INC.

Section Title

Report Summary

Firm History

CRD# 48015

1

9

Firm Profile 2 - 8

Page(s)

Firm Operations 10 - 15

Disclosure Events 16

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CRD# 48015

SEC# 8-52009

Main Office Location

8180 GREENSBORO DR8TH FLOORMCLEAN, VA 22102Regulated by FINRA Philadelphia Office

Mailing Address

8180 GREENSBORO DR8TH FLOORMCLEAN, VA 22102

Business Telephone Number

703-245-4000

Report Summary for this Firm

This report summary provides an overview of the brokerage firm. Additional information for this firm can be foundin the detailed report.

Disclosure Events

Brokerage firms are required to disclose certaincriminal matters, regulatory actions, civil judicialproceedings and financial matters in which the firm orone of its control affiliates has been involved.

Are there events disclosed about this firm? Yes

The following types of disclosures have beenreported:

Type Count

Regulatory Event 4

Arbitration 1

Firm Profile

This firm is classified as a corporation.

This firm was formed in Virginia on 01/10/2000.

Its fiscal year ends in December.

Firm History

Information relating to the brokerage firm's historysuch as other business names and successions(e.g., mergers, acquisitions) can be found in thedetailed report.

Firm Operations

Is this brokerage firm currently suspended with anyregulator? No

This firm conducts 9 types of businesses.

This firm is affiliated with financial or investmentinstitutions.

This firm does not have referral or financialarrangements with other brokers or dealers.

This firm is registered with:

• the SEC• 2 Self-Regulatory Organizations• 53 U.S. states and territories

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1©2020 FINRA. All rights reserved. Report about FOLIO INVESTMENTS, INC.


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This firm is classified as a corporation.

This firm was formed in Virginia on 01/10/2000.

CRD#

This section provides the brokerage firm's full legal name, "Doing Business As" name, business and mailingaddresses, telephone number, and any alternate name by which the firm conducts business and where such name isused.

Firm Profile

Firm Names and Locations

Its fiscal year ends in December.


SEC#

48015

8-52009

Main Office Location

Mailing Address

Business Telephone Number

Doing business as FOLIO INVESTMENTS, INC.

703-245-4000

Regulated by FINRA Philadelphia Office



Other Names of this Firm

Name Where is it used

DIRECTINDEXER AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY 2©2020 FINRA. All rights reserved. Report about FOLIO INVESTMENTS, INC.





AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

FOLIO CLIENT AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

FOLIO FINANCIAL AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

FOLIO INSTITUTIONAL AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

FOLIO INVESTING AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

FOLIOFIRST AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY





AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

FOLIOFN INVESTMENTS, INC. AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY

VIA FOLIO AK, AL, AR, AZ, CA,CO, CT, DC, DE, FL,GA, HI, IA, ID, IL, IN,KS, KY, LA, MA, MD,ME, MI, MN, MO,MS, MT, NC, ND, NE,NH, NJ, NM, NV, NY,OH, OK, OR, PA, PR,RI, SC, SD, TN, TX,UT, VA, VI, VT, WA,WI, WV, WY





This section provides information relating to all direct owners and executive officers of the brokerage firm.

Direct Owners and Executive Officers

Firm Profile

Position

Percentage of Ownership

Is this a public reportingcompany?

Position Start Date

Does this owner direct themanagement or policies ofthe firm?

FOLIO FINANCIAL, INC.

100 % SHAREHOLDER

75% or more

No

Domestic Entity

07/1999

Yes

Is this a domestic or foreignentity or an individual?

Legal Name & CRD# (if any):

Position



Position Start Date


FYFFE, JAMES COMPEAU

CHIEF FINANCIAL OFFICER, FINOP & PFO

Less than 5%

No

Individual

07/2019

Yes

2619159



Position


Position Start Date

GERAGHTY, PETER RICHARD

GENERAL COUNSEL

Less than 5%

Individual

08/2018

4930752








Direct Owners and Executive Officers (continued)

Firm Profile




Less than 5%

No

Yes

Position



Position Start Date


KENNY, JOHN PATRICK

CEO, PRESIDENT & COO, POO

Less than 5%

No

Individual

02/2020

Yes

1431761



Position



Position Start Date


SMITH, RYAN

CHIEF COMPLIANCE OFFICER

Less than 5%

No

Individual

09/2019

Yes

4596415



VIGRASS, GREGORY MICHAEL

1924920







Direct Owners and Executive Officers (continued)

Firm Profile

Position



Position Start Date


PRESIDENT OF FOLIO INSTITUTIONAL, A DIVISION OF FOLIOINVESTMENTS, INC., DIRECTOR

Less than 5%

No

Individual

02/2004

Yes

1924920







This section provides information relating to any indirect owners of the brokerage firm.

Indirect Owners

Firm Profile

WALLMAN, STEVEN MARK HARTE

SHAREHOLDER

FOLIO FINANCIAL, INC.

75% or more

No

Individual

06/1998

Yes

3277959



Company through whichindirect ownership isestablished

Relationship to Direct Owner

Relationship Established









Firm History

This section provides information relating to any successions (e.g., mergers, acquisitions) involving the firm.

No information reported.






Firm Operations

RegistrationsThis section provides information about the regulators (Securities and Exchange Commission (SEC), self-regulatoryorganizations (SROs), and U.S. states and territories) with which the brokerage firm is currently registered andlicensed, the date the license became effective, and certain information about the firm's SEC registration.

This firm is currently registered with the SEC, 2 SROs and 53 U.S. states and territories.

SEC Registration Questions

This firm is registered with the SEC as:

A broker-dealer:

A broker-dealer and government securities broker or dealer:

A government securities broker or dealer only:

This firm has ceased activity as a government securities broker or dealer:

Yes

Yes

No

No

Federal Regulator Status Date Effective

SEC Approved 12/21/1999

Self-Regulatory Organization Status Date Effective

FINRA Approved 12/21/1999

Nasdaq Stock Market Approved 07/12/2006






Firm Operations

Registrations (continued)

U.S. States &Territories

Status Date Effective

Alabama Approved 03/13/2000

Alaska Approved 01/03/2000

Arizona Approved 02/28/2000

Arkansas Approved 02/25/2000

California Approved 02/29/2000

Colorado Approved 01/14/2000

Connecticut Approved 02/24/2000

Delaware Approved 02/28/2000

District of Columbia Approved 12/16/1999

Florida Approved 03/08/2000

Georgia Approved 03/01/2000

Hawaii Approved 03/31/2000

Idaho Approved 01/10/2000

Illinois Approved 03/03/2000

Indiana Approved 03/03/2000

Iowa Approved 03/06/2000

Kansas Approved 03/21/2000

Kentucky Approved 02/25/2000

Louisiana Approved 03/21/2000

Maine Approved 03/06/2000

Maryland Approved 01/03/2000

Massachusetts Approved 02/29/2000

Michigan Approved 03/17/2000

Minnesota Approved 03/07/2000

Mississippi Approved 03/10/2000

Missouri Approved 03/10/2000

Montana Approved 01/31/2000

Nebraska Approved 03/03/2000

Nevada Approved 01/05/2000

New Hampshire Approved 03/27/2000

New Jersey Approved 03/01/2000

New Mexico Approved 01/10/2000

New York Approved 02/29/2000

U.S. States &Territories

Status Date Effective

North Carolina Approved 02/29/2000

North Dakota Approved 03/27/2000

Ohio Approved 02/24/2000

Oklahoma Approved 03/10/2000

Oregon Approved 02/10/2000

Pennsylvania Approved 02/24/2000

Puerto Rico Approved 02/29/2000

Rhode Island Approved 02/10/2000

South Carolina Approved 02/23/2000

South Dakota Approved 02/08/2000

Tennessee Approved 03/02/2000

Texas Approved 03/06/2000

Utah Approved 01/03/2000

Vermont Approved 04/04/2000

Virgin Islands Approved 09/29/2005

Virginia Approved 11/15/1999

Washington Approved 01/13/2000

West Virginia Approved 02/17/2000

Wisconsin Approved 03/02/2000

Wyoming Approved 02/24/2000






Firm Operations

Types of BusinessThis section provides the types of business, including non-securities business, the brokerage firm is engaged in orexpects to be engaged in.

Other Types of Business

This firm does not effect transactions in commodities, commodity futures, or commodity options.This firm does not engage in other non-securities business.

Non-Securities Business Description:

This firm currently conducts 9 types of businesses.

Types of Business

Broker or dealer retailing corporate equity securities over-the-counter

Broker or dealer selling corporate debt securities

Mutual fund retailer

U S. government securities broker

Broker or dealer selling securities of non-profit organizations (e.g., churches, hospitals)

Non-exchange member arranging for transactions in listed securities by exchange member

Trading securities for own account

Private placements of securities

Other - FOLIO INSTITUTIONAL IS A DIVISION OF THE BROKER DEALER, AN ALREADY EXISTING LINE OFBUSINESS FOR THE FIRM WHEREBY WE PROVIDE A PLATFORM AND SERVICES FOR INVESTMENTADVISORS, 401(K) PLAN ADMINISTRATORS, AND OTHER SIMILAR ENTITIES TO ENTER ORDERS ANDEXECUTE TRANSACTIONS, AS WELL AS PROVIDING CUSTOMER RECORD KEEPING AND CUSTODYFUNCTIONS.

FOLIO INVESTING IS THE NAME THAT WILL BE FEATURED ON OUR RETAIL WEBSITE FOR OUR RETAILBUSINESS.






Firm Operations

Clearing Arrangements

This firm does hold or maintain funds or securities or provide clearing services for other broker-dealer(s).

Introducing Arrangements

This firm does not refer or introduce customers to other brokers and dealers.






Firm Operations

Industry Arrangements

This firm does have books or records maintained by a third party.

This firm does not have accounts, funds, or securities maintained by a third party.

This firm does not have customer accounts, funds, or securities maintained by a third party.

This firm does not have individuals who control its management or policies through agreement.

This firm does not have individuals who wholly or partly finance the firm's business.

Control Persons/Financing

Name: LENDINGCLUB CORPORATION

Business Address: 71 STEVENSON, SUITE 300SAN FRANCISCO, CA 94105

Effective Date: 10/06/2008

Description: LENDING CLUB COLLECTS INFORMATION REGARDING PROSPECTIVEFOLIO CUSTOMERS WHO ARE MEMBERS OF LENDING CLUB VIA ANONLINE AUTOMATED PROCESS, NECESSARY TO OPEN A CUSTOMERACCOUNT WITH FOLIO.

LENDING CLUB KEEPS THE BOOKS AND RECORDS OF ATSTRANSACTIONS FOR FOLIO CLIENTS.






Firm Operations

Organization AffiliatesThis section provides information on control relationships the firm has with other firms in the securities, investmentadvisory, or banking business.

This firm is, directly or indirectly:

· in control of· controlled by· or under common control withthe following partnerships, corporations, or other organizations engaged in the securities or investmentadvisory business.

Yes

No

No

11/01/2016

5475 MARK DABLING BOULEVARDSUITE 108COLORADO SPRINGS, CO 80918

109036

FIRST AFFIRMATIVE FINANCIAL NETWORK LLC is under common control with the firm.

THIS ENTITY, WHICH IS REGISTERED AS AN INVESTMENT ADVISER, ISDIRECTLY CONTROLLED BY FOLIOFN,WHICH ALSO CONTROLS THEAPPLICANT.

Description:

Investment AdvisoryActivities:

Securities Activities:

Country:

Foreign Entity:

Effective Date:

Business Address:

CRD #:

This firm is not directly or indirectly, controlled by the following:

· bank holding company· national bank· state member bank of the Federal Reserve System· state non-member bank· savings bank or association· credit union· or foreign bank






Disclosure Events

All firms registered to sell securities or provide investment advice are required to disclose regulatory actions, criminal orcivil judicial proceedings, and certain financial matters in which the firm or one of its control affiliates has been involved.For your convenience, below is a matrix of the number and status of disclosure events involving this brokerage firm orone of its control affiliates. Further information regarding these events can be found in the subsequent pages of thisreport.

Final On AppealPending

Regulatory Event 0 4 0

Arbitration N/A 1 N/A






Disclosure Event Details

What you should know about reported disclosure events:

1. BrokerCheck provides details for any disclosure event that was reported in CRD. It also includessummary information regarding FINRA arbitration awards in cases where the brokerage firm wasnamed as a respondent.

2. Certain thresholds must be met before an event is reported to CRD, for example: o A law enforcement agency must file formal charges before a brokerage firm is required to disclose a

particular criminal event.3. Disclosure events in BrokerCheck reports come from different sources:

o Disclosure events for this brokerage firm were reported by the firm and/or regulators. When the firmand a regulator report information for the same event, both versions of the event will appear in theBrokerCheck report. The different versions will be separated by a solid line with the reporting sourcelabeled.

4. There are different statuses and dispositions for disclosure events: o A disclosure event may have a status of pending, on appeal, or final.

§ A "pending" event involves allegations that have not been proven or formally adjudicated.§ An event that is "on appeal" involves allegations that have been adjudicated but are currently

being appealed.§ A "final" event has been concluded and its resolution is not subject to change.

o A final event generally has a disposition of adjudicated, settled or otherwise resolved.§ An "adjudicated" matter includes a disposition by (1) a court of law in a criminal or civil matter,

or (2) an administrative panel in an action brought by a regulator that is contested by the partycharged with some alleged wrongdoing.

§ A "settled" matter generally involves an agreement by the parties to resolve the matter.Please note that firms may choose to settle customer disputes or regulatory matters forbusiness or other reasons.

§ A "resolved" matter usually involves no payment to the customer and no finding ofwrongdoing on the part of the individual broker. Such matters generally involve customerdisputes.

5. You may wish to contact the brokerage firm to obtain further information regarding any of thedisclosure events contained in this BrokerCheck report.

Regulatory - Final

This type of disclosure event involves (1) a final, formal proceeding initiated by a regulatory authority (e.g., a statesecurities agency, self-regulatory organization, federal regulator such as the U.S. Securities and Exchange Commission,foreign financial regulatory body) for a violation of investment-related rules or regulations; or (2) a revocation orsuspension of the authority of a brokerage firm or its control affiliate to act as an attorney, accountant or federalcontractor.

Disclosure 1 of 4

Reporting Source: Regulator

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTION AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDINACCURATE BLUE SHEETS TO THE SEC AND FINRA. THE FINDINGSSTATED THAT THE FIRM RECODED ITS INTERNAL BLUE SHEET PROGRAM.AFTER THIS RECODING, THE FIRM BEGAN ERRONEOUSLY REPORTINGTHE TRADE QUANTITY AND TRANSACTION AMOUNT FOR CERTAINTRANSACTIONS. ADDITIONALLY, CERTAIN BLUE SHEETS WERESUBMITTED WITH EITHER AN INACCURATE OPPOSING BROKER NUMBEROR CONTRA PARTY IDENTIFIER. THE FINDINGS ALSO STATED THAT THEFIRM DID NOT HAVE IN PLACE AN ADEQUATE AUDIT SYSTEM PROVIDINGFOR ACCOUNTABILITY REGARDING THE INPUTTING OF RECORDSREQUIRED TO BE MAINTAINED AND PRESERVED.

Current Status: Final






Initiated By: FINRA

Principal Sanction(s)/ReliefSought:

Other

Other Sanction(s)/ReliefSought:

N/A

Date Initiated: 06/04/2014

Docket/Case Number: 2013037231101

Principal Product Type: Other

Other Product Type(s): UNSPECIFIED SECURITIES

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTION AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDINACCURATE BLUE SHEETS TO THE SEC AND FINRA. THE FINDINGSSTATED THAT THE FIRM RECODED ITS INTERNAL BLUE SHEET PROGRAM.AFTER THIS RECODING, THE FIRM BEGAN ERRONEOUSLY REPORTINGTHE TRADE QUANTITY AND TRANSACTION AMOUNT FOR CERTAINTRANSACTIONS. ADDITIONALLY, CERTAIN BLUE SHEETS WERESUBMITTED WITH EITHER AN INACCURATE OPPOSING BROKER NUMBEROR CONTRA PARTY IDENTIFIER. THE FINDINGS ALSO STATED THAT THEFIRM DID NOT HAVE IN PLACE AN ADEQUATE AUDIT SYSTEM PROVIDINGFOR ACCOUNTABILITY REGARDING THE INPUTTING OF RECORDSREQUIRED TO BE MAINTAINED AND PRESERVED.

Resolution Date: 06/04/2014

Resolution:

Other Sanctions Ordered: THE FIRM FURTHER AGREES TO CONDUCT A REVIEW OF ITS POLICIES,SYSTEMS, AND PROCEDURES (WRITTEN OR OTHERWISE) RELATING TOITS COMPILATION AND SUBMISSION OF BLUE SHEET DATA AND THE AUDITDEFICIENCIES ADDRESSED HEREIN.

Sanction Details: SEE ABOVE

Regulator Statement FINE PAID IN FULL JUNE 20, 2014

Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?

No

Sanctions Ordered: CensureMonetary/Fine $50,000.00

Acceptance, Waiver & Consent(AWC)





https://www.finra.org/rules-guidance/oversight-enforcement/finra-disciplinary-actions?search=2013037231101


iReporting Source: Firm

Initiated By: FINRA


Other


N/A




Other Product Type(s): UNSPECIFIED SECURITIES

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTION AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDINACCURATE BLUE SHEETS TO THE SEC AND FINRA. THE FINDINGSSTATED THAT THE FIRM RECODED ITS' INTERNAL BLUE SHEET PROGRAMIN NOVEMBER OF 2013. AFTER THE RECODING, THE FIRM BEGANERRONEOUSLY REPORTING THE TRADE QUANTITY AND TRANSACTIONAMOUNT FOR CERTAIN TRANSACTIONS. THE ISSUE WAS REPORTED TOFINRA IN APRIL OF 2014. ADDITIONALLY, CERTAIN BLUE SHEETS WERESUBMITTED WITH EITHER AN INACCURATE OPPOSING BROKER NUMBEROR CONTRA PARTY IDENTIFIER. THE FINDINGS ALSO STATED THAT THEFIRM DID NOT HAVE IN PLACE AN ADEQUATE AUDIT SYSTEM PROVIDINGFOR ACCOUNTABILITY REGARDING THE INPUTTING OF RECORDSREQUIRED TO BE MAINTAINED AND PRESERVED.



Resolution:

Other Sanctions Ordered: THE FIRM AGREES TO CONDUCT A REVIEW OF ITS' POLICIES, SYSTEMS,AND PROCEDURES (WRITTEN OR OTHERWISE) RELATING TO ITS'COMPILATION AND SUBMISSION OF BLUE SHEET DATA AND THE AUDITDEFICIENCIES ADDRESSED HEREIN.




Disclosure 2 of 4

i







Disclosure 2 of 4


Initiated By: FINRA


Other




Other Product Type(s): ISSUER NOTES

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT ISSUERSOPERATE WEBSITES THAT OFFER MARKETPLACES FOR THE NOTES ANDTHE FIRM PROVIDES THE EXCLUSIVE SECONDARY MARKETS FOR THEREGISTERED NOTES OFFERED BY THE ISSUERS THROUGH TRADINGPLATFORMS. THE FINDINGS STATED THAT THE TRADING PLATFORMS AREACCESSIBLE EXCLUSIVELY FROM HYPERLINKS LOCATED ON THEISSUERS' WEBSITES, AND ONLY TO MEMBERS OF THE ISSUERS WHOALSO BECOME THE FIRM CUSTOMERS. DURING THE RELEVANT PERIOD,THE FIRM REVIEWED AND APPROVED THE COMMUNICATIONS. HOWEVER,THERE WERE SEVERAL RISKS ASSOCIATED WITH TRADING THE ISSUERS'NOTES ON THE TRADING PLATFORMS. THE FIRM OMITTED AND, IN SOMEINSTANCES, FAILED TO PROMINENTLY DISCLOSE IN THECOMMUNICATIONS, PARTICULARLY ON THE TRADING PLATFORMS RISKSASSOCIATED WITH THE NOTES THAT RENDERED THE CONTENT UNFAIRAND UNBALANCED AND/OR WITHOUT A SOUND BASIS FOR EVALUATINGTHE FACTS IN REGARD TO THE SECURITIES, INDUSTRY, AND/ORSERVICES PROVIDED. THE FIRM FAILED TO ENSURE THAT THECOMMUNICATIONS ADEQUATELY AND PROMINENTLY DISCLOSED HOWESTIMATED RETURNS WERE CALCULATED. IN ADDITION, IN SEVERALINSTANCES ON ONE ISSUER'S WEBSITE, THE NOTES WERE DESCRIBEDAS QUALITY NOTES, THEREFORE THE FIRM ALLOWED THE NOTES TO BEDESCRIBED AS QUALITY NOTES WITHOUT INFORMATION SUFFICIENT TOFORM A SOUND BASIS FOR EVALUATING THE FACTS IN REGARD TO THENOTES. THE FINDINGS ALSO STATED THAT THE COMMUNICATIONS ONISSUERS' WEBSITE CONTAINED FALSE, EXAGGERATED, UNWARRANTED,AND/OR MISLEADING STATEMENTS. THE FINDINGS ALSO INCLUDED THAT AREGISTERED PRINCIPAL OF THE FIRM DID NOT APPROVE BY SIGNATUREOR INITIAL AND DATE THE COMMUNICATIONS PRIOR TO THEIR USE. FINRAFOUND THAT THE FIRM DID NOT MAINTAIN THE COMMUNICATIONS IN ASEPARATE FILE BEGINNING ON THE DATE OF FIRST USE. FINRA ALSOFOUND THAT THE FIRM VIOLATED COMMERCIAL HONOR AND PRINCIPLESOF TRADE THROUGH ITS CONDUCTS.









Other


N/A


Resolution:

Other Sanctions Ordered: UNDERTAKING TO RENDER LANGUAGE, ASSOCIATED WITH THE FINANCIALPRODUCT THAT ARE FAIR AND BALANCE AND PROVIDE A SOUND BASISFOR EVALUATING FACTS IN THE COMMUNICATIONS CURRENTLY ON ONEISSUER'S WEBSITE MORE PROMINENT NOT LATER THAN 15 BUSINESSDAYS AFTER ACCEPTANCE OF THIS AWC. ALSO, TO DISPLAYPROMINENTLY A SIMILAR RISK DISCLOSURE IN ANY FUTURE RETAILCOMMUNICATIONS THAT DESCRIBES THE FEATURES OR BENEFITS OFTHE TRADING PLATFORMS AND/OR THE SERVICES PROVIDED BY THEFIRM FOR THE ISSUERS.


FINE PAID IN FULL ON MAY 22, 2014.


No




Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT (A) FOLIO HASPROVIDED WEB-BASED ALTERNATIVE TRADING SYSTEMS ("TRADINGPLATFORMS") TO TWO NON-FINRA MEMBER ISSUERS THAT OFFERREGISTERED NOTES AND ACCESS TO THE TRADING PLATFORMSEXCLUSIVELY THROUGH THE ISSUER'S WEBSITES (VIA HYPERLINKS) TO "MEMBERS OF THE ISSUER" WHO BECOME CUSTOMERS OF THE FIRM; (B)DURING THE RELEVANT PERIOD, THE FIRM REVIEWED AND APPROVEDTHE TRADING PLATFORMS, LINKS TO THE TRADING PLATFORMS, THEFIRM'S ACCOUNT OPENING PAGES AND TEXT ON THOSE PORTIONS OFTHE ISSUERS' WEBSITES THAT DIRECTLY REFERENCED THE FIRM AND/ORTHE TRADING PLATFORMS (COLLECTIVELY, THE "COMMUNICATIONS"); AND(C) THERE WERE SEVERAL RISKS ASSOCIATED WITH TRADING THEISSUERS' NOTES ON THE TRADING PLATFORMS THAT WERE NOTDISCLOSED OR PROMINENTLY DISCLOSED IN THE COMMUNICATIONS,WHICH RENDERED THE CONTENT UNFAIR AND UNBALANCED AND/ORWITHOUT A SOUND BASIS FOR EVALUATING THE FACTS IN REGARD TOTHE SECURITIES, INDUSTRY, AND/OR SERVICES PROVIDED. THE FIRMFAILED TO ENSURE THAT THE COMMUNICATIONS ADEQUATELY ANDPROMINENTLY DISCLOSED HOW ESTIMATED RETURNS WERECALCULATED. IN ADDITION, IN SEVERAL INSTANCES ON ONE ISSUER'SWEBSITE, THE NOTES WERE DESCRIBED AS QUALITY NOTES, THEREFORETHE FIRM ALLOWED THE NOTES TO BE DESCRIBED AS QUALITY NOTESWITHOUT INFORMATION SUFFICIENT TO FORM A SOUND BASIS FOREVALUATING THE FACTS IN REGARD TO THE NOTES. THE FINDINGS ALSOSTATED THAT THE COMMUNICATIONS ON ISSUERS' WEBSITE CONTAINEDFALSE, EXAGGERATED, UNWARRANTED, AND/OR MISLEADINGSTATEMENTS BY STATING, FOR EXAMPLE, THAT IT IS QUICK AND EASY TOESTABLISH A BROKERAGE ACCOUNT FOR TRADING WHEN THERE AREREGULATORY REQUIREMENTS THAT MUST BE MET BEFORE INDIVIDUALSWERE AUTHORIZED TO OPEN AN ACCOUNT USE THE TRADINGPLATFORMS. THE FINDINGS ALSO INCLUDED THAT A REGISTEREDPRINCIPAL OF THE FIRM DID NOT APPROVE BY SIGNATURE OR INITIAL ANDDATE THE COMMUNICATIONS PRIOR TO THEIR USE. FINRA FOUND THATTHE FIRM DID NOT MAINTAIN THE COMMUNICATIONS IN A SEPARATE FILEBEGINNING ON THE DATE OF FIRST USE. FINRA ALSO FOUND THAT THEFIRM VIOLATED COMMERCIAL HONOR AND PRINCIPLES OF TRADETHROUGH ITS CONDUCT.







Initiated By: FINRA


Other


N/A




Other Product Type(s): ISSUER NOTES

WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT (A) FOLIO HASPROVIDED WEB-BASED ALTERNATIVE TRADING SYSTEMS ("TRADINGPLATFORMS") TO TWO NON-FINRA MEMBER ISSUERS THAT OFFERREGISTERED NOTES AND ACCESS TO THE TRADING PLATFORMSEXCLUSIVELY THROUGH THE ISSUER'S WEBSITES (VIA HYPERLINKS) TO "MEMBERS OF THE ISSUER" WHO BECOME CUSTOMERS OF THE FIRM; (B)DURING THE RELEVANT PERIOD, THE FIRM REVIEWED AND APPROVEDTHE TRADING PLATFORMS, LINKS TO THE TRADING PLATFORMS, THEFIRM'S ACCOUNT OPENING PAGES AND TEXT ON THOSE PORTIONS OFTHE ISSUERS' WEBSITES THAT DIRECTLY REFERENCED THE FIRM AND/ORTHE TRADING PLATFORMS (COLLECTIVELY, THE "COMMUNICATIONS"); AND(C) THERE WERE SEVERAL RISKS ASSOCIATED WITH TRADING THEISSUERS' NOTES ON THE TRADING PLATFORMS THAT WERE NOTDISCLOSED OR PROMINENTLY DISCLOSED IN THE COMMUNICATIONS,WHICH RENDERED THE CONTENT UNFAIR AND UNBALANCED AND/ORWITHOUT A SOUND BASIS FOR EVALUATING THE FACTS IN REGARD TOTHE SECURITIES, INDUSTRY, AND/OR SERVICES PROVIDED. THE FIRMFAILED TO ENSURE THAT THE COMMUNICATIONS ADEQUATELY ANDPROMINENTLY DISCLOSED HOW ESTIMATED RETURNS WERECALCULATED. IN ADDITION, IN SEVERAL INSTANCES ON ONE ISSUER'SWEBSITE, THE NOTES WERE DESCRIBED AS QUALITY NOTES, THEREFORETHE FIRM ALLOWED THE NOTES TO BE DESCRIBED AS QUALITY NOTESWITHOUT INFORMATION SUFFICIENT TO FORM A SOUND BASIS FOREVALUATING THE FACTS IN REGARD TO THE NOTES. THE FINDINGS ALSOSTATED THAT THE COMMUNICATIONS ON ISSUERS' WEBSITE CONTAINEDFALSE, EXAGGERATED, UNWARRANTED, AND/OR MISLEADINGSTATEMENTS BY STATING, FOR EXAMPLE, THAT IT IS QUICK AND EASY TOESTABLISH A BROKERAGE ACCOUNT FOR TRADING WHEN THERE AREREGULATORY REQUIREMENTS THAT MUST BE MET BEFORE INDIVIDUALSWERE AUTHORIZED TO OPEN AN ACCOUNT USE THE TRADINGPLATFORMS. THE FINDINGS ALSO INCLUDED THAT A REGISTEREDPRINCIPAL OF THE FIRM DID NOT APPROVE BY SIGNATURE OR INITIAL ANDDATE THE COMMUNICATIONS PRIOR TO THEIR USE. FINRA FOUND THATTHE FIRM DID NOT MAINTAIN THE COMMUNICATIONS IN A SEPARATE FILEBEGINNING ON THE DATE OF FIRST USE. FINRA ALSO FOUND THAT THEFIRM VIOLATED COMMERCIAL HONOR AND PRINCIPLES OF TRADETHROUGH ITS CONDUCT.


Resolution:









Other Sanctions Ordered: UNDERTAKING TO RENDER LANGUAGE, ASSOCIATED WITH THE FINANCIALPRODUCT THAT ARE FAIR AND BALANCE AND PROVIDE A SOUND BASISFOR EVALUATING FACTS IN THE COMMUNICATIONS CURRENTLY ON ONEISSUER'S WEBSITE MORE PROMINENT NOT LATER THAN 15 BUSINESSDAYS AFTER ACCEPTANCE OF THIS AWC. ALSO, TO DISPLAYPROMINENTLY A SIMILAR RISK DISCLOSURE IN ANY FUTURE RETAILCOMMUNICATIONS THAT DESCRIBES THE FEATURES OR BENEFITS OFTHE TRADING PLATFORMS AND/OR THE SERVICES PROVIDED BY THEFIRM FOR THE ISSUERS.


CensureMonetary/Fine $35,000.00

Disclosure 3 of 4

i


Initiated By: FINRA






Other Product Type(s): NASDAQ NATIONAL MARKET SECURITIES, NASDAQ SMALLCAPSECURITIES

Allegations: NASD RULES 4632(C)(5), 4632(F), 4642(C)(5) - FOLIOFN INVESTMENTS, INC.FAILED TO REPORT THE TIME OF EXECUTION TO THE AUTOMATEDCONFIRMATION TRANSACTION SERVICE (ACT)IN LAST SALE REPORTS OFTRANSACTIONS IN NASDAQ NATIONAL MARKET AND NASDAQ SMALLCAPSECURITIES. THE FIRM FAILED TO INCLUDE THE BUNCHED ORDERMODIFIER (".B") FOR AGGREGATED TRADE REPORTS SUBMITTED TO ACT.



Resolution:


No








Other Sanctions Ordered:

Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED AND FINED $13,000.


No



Initiated By: FINRA


Censure


FINE


Docket/Case Number: 20050006521-01

Principal Product Type: Equity - OTC

Other Product Type(s):

Allegations: FOLIOFN INVESTMENTS, INC, FAILED TO REPORT THE TIME OFEXECUTION TO ACT FOR 18,889 LAST SALE REPORTS IN NASDQ NMSSTOCKS AND 831 LAST SALE REPORTS IN NASDAQ SMALL CAPSECURITIES DURING THE TIME PERIOD OF 2002-2004 IN VIOLATION OFFINRA MARKETPALCE RULES 4632(C)(5) AND 4642(C)(5).

DURING 2005 THE FIRM FAILED TO INCLUDE A BUNCHED ORDER MODIFIER(".B") FOR 4,581 AGGREGATED TRADE REPORTS SUBMITTED TO ACT INVIOLATION OF FINRA MARKETPLACE RULE 4632(F).



Resolution:









Sanction Details: CENSURE, FINE OF $13,000 AGAINST FOLIOFN INVESTMENTS, INC.

Firm Statement THE AWC HAS BEEN SIGNED BY TOM GIRA OF MKT REG AND ACCPETEDBY THE ODA.


Disclosure 4 of 4

i


Initiated By: NASD




Docket/Case Number: 20050002121-01

Principal Product Type: Equity Listed (Common & Preferred Stock)


Allegations: NASD RULE 6955(A) - FOLIOFN INVESTMENTS, INC. SUBMITTED REPORTSTO OATS WITH RESPECT TO EQUITY SECURITIES TRADED ON THENASDAQ STOCK MARKET THAT WERE NOT IN THE ELECTRONIC FORMPRESCRIBED BY NASD AND WERE REPAIRABLE. THE REPORTS WEREREJECTED BY THE OATS SYSTEM AND NOTICE OF SUCH REJECTION WASMADE AVAILABLE TO THE FIRM ON THE OATS WEBSITE BUT THE FIRM DIDNOT SUCCESSFULLY CORRECT OR REPLACE THE REPORTS.



Resolution:



No

Sanctions Ordered: Monetary/Fine $5,000.00







Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS FINED $5,000.


Initiated By: NATIONAL ASSOCIATION OF SECURITIES DEALERS




Docket/Case Number: 20050002121-01 AWC

Principal Product Type: Equity Listed (Common & Preferred Stock)


Allegations: VIOLATION OF NASD RULE 6955(A). FOLIOFN INVESTMENTS, INCSUBMITTED REPORTS TO THE OATS SYSTEM ON DECEMBER 24 ANDDECEMBER 26, 2003. THOSE REPORTS WERE REJECTED BY THE OATSSYSTEM AND NOTICE OF SUCH REJECTION WAS MADE AVAILABLE TO THEFIRM ON THE OATS WEBSITE. THE FIRM DID NOT SUCCESSFULLYCORRECT OR REPAIR THE REPORTS.



Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRMCONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OFFINDINGS;THEREFORE THE FIRM IS FINED $5,000.

Sanctions Ordered: Monetary/Fine $5,000.00







Arbitration Award - Award / Judgment

Brokerage firms are not required to report arbitration claims filed against them by customers; however, BrokerCheckprovides summary information regarding FINRA arbitration awards involving securities and commodities disputesbetween public customers and registered securities firms in this section of the report. The full text of arbitration awards issued by FINRA is available at www.finra.org/awardsonline.

Disclosure 1 of 1


Type of Event: ARBITRATION

Arbitration Forum:

Case Initiated:

Case Number:

Allegations:

Disputed Product Type:

Sum of All Relief Requested:

Disposition:

Disposition Date:

Sum of All Relief Awarded:

NASD

05/07/2004

04-03317

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT RELATED-NEGLIGENCE; DO NOT USE-NO OTHER CONTROVERSY INVOLVED

DO NOT USE-NO OTHER TYPE OF SEC INVOLVE; UNKNOWN TYPE OFSECURITIES

$25,000.00

AWARD AGAINST PARTY

02/15/2005

$2,340.00

There may be a non-monetary award associated with this arbitration.Please select the Case Number above to view more detailed information.





www.finra.org/awardsonline

https://www.finra.org/arbitration-mediation/arbitration-awards-online?search=04-03317


End of Report

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