This guide summarizes important information concerning the scope and terms of the brokerage services we offer and details the material conflicts of interest that arise through our delivery of brokerage services to you. We encourage you to review this information carefully, along with any applicable agreement(s) and disclosure documentation you may receive from us.
As you review this information, we would like to remind you that GB Capital Markets (“GBCM”) is registered with the U.S. Securities and Exchange Commission (“SEC”) as a broker-dealer and is also a member of the Financial Industry Regulatory Authority, Inc. All recommendations regarding your brokerage investments will be made in a broker-dealer capacity. Our brokerage services are the primary focus of this guide. In addition, our Form CRS contains important information about the types of services we offer, along with general information related to compensation, conflicts of interest, disciplinary action, and other reportable legal information. Form CRS is available via website at Investor.gov/CRS.
Your Brokerage Relationship with GBCM
GBCM offers limited brokerage services and products to institutional and retail customers. The term “retail customers” refers to natural persons and the individual legal representatives of such natural persons. This term does not apply to institutional accounts (including corporations, partnerships, institutional trust accounts, etc.) and other accounts which are not subject to laws, rules, and regulations applicable only to retail customers. Accounts other than retail customer accounts, however, remain subject to all other applicable laws, rules, and regulations. In acting as your broker/dealer, GB Capital and its Registered Representatives (“Reps”) are acting as your agent. Under applicable laws, rules, and regulations, when making investment recommendations to retail customers, GBCM and other securities brokers have a duty to act in your best interest. GBCM and its Reps have conflicts of interest with respect to their investment recommendations and other relationships with you and other companies such as issuers we represent.All recommendations regarding purchases will be made by your GBCM representative in a broker/dealer capacity only. Brokerage services are different from advisory services.
Based on the nature of your investments, GBCM receives direct or indirect compensation in connection with the services we provide to you. For example, you and/or your representative or a third party, like the issuer, may pay GBCM for services that GBCM provides through sales commissions.
Please see the materials which follow as well as the additional material referenced in this document for additional information or ask your GBCM representative to answer any questions you may have concerning our obligation to make investment recommendations in your best interest and/or our conflicts of interest in making such recommendations.
Your brokerage relationship with GBCM is a transactional relationship and unless all parties expressly agree otherwise in writing:
Available Investment Options
GBCM offers limited services and engages only in alternative investments (private placements), and mergers and acquisitions. Alternative investments available to GBCM customers are limited to investments which sponsors/issuers have contracted directly with us to provide selling agency and other distribution services. The fact that an investment is available with GBCM is not a form of investment recommendation. All investments are subject to market risks and fluctuate in value, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Commission rates earned by GBCM through an offering will vary in accordance with the terms and conditions of each offering.
Incidental Brokerage Services, Recommendations and Investment Monitoring
We may also provide other incidental services recommendations to buy, sell, or hold assets. When we make a securities recommendation, investment strategy recommendation or recommendation, the recommendation is made in our capacity as a broker-dealer. Any such statement will be made orally to you. Moreover, when we act in a brokerage capacity, we do not agree to enter into a fiduciary relationship with you.
It is important for you to understand that when our Reps make a recommendation to you, we are obligated to ensure the recommendation is in your best interest, considering reasonably available alternatives, and based on your stated investment objective, risk tolerance, liquidity needs, time horizon, financial needs, tax status, and other financial information you provide us. You may accept or reject any recommendation. It is also your responsibility to monitor the investments you own, and we encourage you to do so regularly. We do not commit to provide on-going monitoring of your investments. We occasionally, and without any formal agreement or obligation, may review your investment to determine whether to recommend other investments. If you prefer on-going monitoring of your account or investments, you should speak with a knowledgeable third party to consider whether an investment advisory relationship is more appropriate for you.
Please also consider that from time to time we may provide you with additional information and resources to assist you with managing your investments. This may include but is not limited to educational resources, sales and marketing materials, or pitch decks, which we do so as a courtesy to you. These activities are not designed to monitor investment holdings, they do not contain specific investment recommendations about investment holdings, and you should not consider them a recommendation to trade or hold any particular securities. Upon your request, we will review such information and reports with you and may provide you with investment recommendations, but we are not under a specific obligation to do so.
Investment Minimums and Activity Requirements
There is no minimum initial investment required to participate in a private placement.
Investing in Alternative Investments (Private Placements)
Alternative Investments are securities products such as private placements, private equity funds, hedge funds, venture capital, and real estate funds. Alternative Investments are more complex than traditional investment vehicles. They often have higher fees associated with them and are more volatile than traditional investments such as stocks, bonds, and mutual funds. The majority are invested in illiquid investments making them difficult to exit and price on a regular basis. Alternative Investments is a private alternative to issuing, or selling, a publicly offered security as a means for raising capital. In a private placement, both the offering and sale of debt or equity securities is made between a business, or issuer, and a select number of investors. There may be as few as one investor for any issue. The three most important features that would classify a securities issue as a private placement are:
Companies, both public and private, issue in the private placement market for a variety of reasons, including a desire to access long-term, fixed-rate capital, diversify financing sources, add additional financing capacity beyond existing investors (banks, private equity, etc.) or, in the case of privately held businesses, to maintain confidentiality. Since private placements are offered only to a limited pool of accredited investors, they are exempt from registering with the Securities and Exchange Commission (SEC). This affords the issuer the opportunity to avoid certain costs associated with a public offering as well as allows for more flexibility regarding structure and terms. Investments in private placements are highly speculative and involve a high degree of risk. Interests should not be purchased by any person who cannot afford the loss of the entire investment. We only offer and recommend securities that are part of a private offering in which GBCM is part of the underwriting syndicate or selling group or has otherwise been engaged by the issuer as placement agent or in a similar capacity to offer and sell the securities.
When a private placement is offered by GBCM, we do so on a best-efforts basis, meaning we do not agree to raise all the money requested by the issuer. Once you subscribe for a private placement, we will not monitor your investment on a regular basis. Moreover, we do not agree to enter into a fiduciary relationship with you. It is important for you to understand that when our Registered Representatives make a recommendation to you, we are obligated to ensure the recommendation is in your best interest, considering reasonably available alternatives, and based on your stated investment objective, risk tolerance, liquidity needs, time horizon, financial needs, tax status, and other financial information you provide us. You may accept or reject any recommendation. It is also your responsibility to monitor your investments, and we encourage you to do so regularly. We do not commit to provide on-going monitoring of any recommended securities. From time to time, we may provide you with additional information and resources to assist you with managing your investment. This may include but is not limited to educational resources, financial reports, summaries and/or updates about the issuer. When we offer this information, we do so as a courtesy to you. These activities are not designed to monitor specific investment holdings, they do not contain specific investment recommendations about investment holdings, and you should not consider them a recommendation to trade or hold any particular security. Upon your request, we will review such information and reports with you and may provide you with investment recommendations, but we are not under any specific obligation to do so. We do not offer all types of securities, but limit investment recommendations to private placements and certain other securities. Other security products or brokerage services may be more suitable for you.
Alternative Investments Fees & Expenses
Our Firm performs due diligence for each type of alternative investment in which our Firm and Reps participate. As part of our due diligence, we perform an analysis of each alternative investment to determine if the investment would be suitable for our clients. As each alternative investment is structured differently, the fees and commissions we earn on each sale may be disclosed in the offering documents for the specific investment. These fees can range from 0.0% to 7.0%, are paid by the Sponsor/Issuer directly to GBCM and typically do not come out of your investment. GBCM Reps are compensated from this fee. Depending on the product sponsor, for example the sponsor of a fund versus an issuer, sometimes the fee GBCM receives may be deducted from your initial investment. Any ongoing fees or upfront commission paid to us may vary based on the particular interest or share class selected. You should make sure you talk to a knowledgeable third party regarding the fees, expenses, and risks prior to investing in an alternative investment.
At times, GB Capital may receive warrants in a particular issuer or digital currency as a form of compensation. This is paid to us by the Issuer and disclosed in the private placement memorandum, if available.
Alternative Investment Compensation, & Conflicts of Interest
To the extent alternative investments provide differing levels of compensation to GBCM and your GBCM Representative, this creates a conflict of interest as your Representative may be incentivized to favor one alternative investment over another. GBCM discloses this conflict of interest to you and supervises your Representative’s recommendations with respect to alternative investments to ensure one investment is not favored over another. Additional information is provided in each alternative investment’s prospectus or other offering materials, including investment structure, fees, expenses, and risks. We encourage you to fully read the prospectus or offering material prior to purchasing shares of an alternative investment.
At times, GBCM and/or its Reps may buy securities for their own accounts in private placements that GBCM has also participated in the capital raising activities. This presents a conflict of interest. In any instance where our Reps are purchasing the same securities as we are offering to clients, GBCM will uphold its fiduciary duty by always transacting on behalf of its clients before transacting for the Rep’s own benefit. It is the policy of GBCM that registered persons must avoid securities transactions and activities for their own accounts that might conflict with or be detrimental to the interest of a client.
To the extent Reps are aware of capital raising activities in a particular issue, he/she will make every effort to trade in their own accounts only after orders for clients are filled first. To mitigate or remedy any conflicts of interest, GBCM will collect and monitor personal trading reports for adherence to GBCM’s procedures. GBCM will document any transactions that present conflicts of interest and will implement procedures designed to ensure that personal trading activities will not disadvantage the issuer or any client.
Some GBCM Reps are independently employed by third-party or affiliated consulting firms. At times, some GBCM customers will also be clients of those third-party or affiliated consulting firms and Reps may concurrently serve as consultants and registered representatives to the same issuer. To mitigate any conflicts of interest, GBCM will supervise Reps and their recommendations for adherence to GBCM’s procedures as well as document these transactions to ensure one investment is not favored over another.
It is important for you to understand that all investment recommendations and activities involve risk, including the risk that you may lose your entire principal. Higher-risk investments, including private placements, may have the potential for higher returns but also for greater losses. The higher your “risk tolerance,” meaning the amount of risk or loss you are willing and able to accept to achieve your investment goals, the more you may decide to invest in higher-risk investments offering the potential for greater returns. Our recommendations are based in part on your risk tolerance and investment objective. We encourage you to carefully consider your investment objective and risk tolerance before investing.
Private Placements are extremely speculative, illiquid, and includes unique risks. While we will take reasonable care in developing and making recommendations to you, private placements involve risk, and you may lose money. There is no guarantee that any private placement will meet the stated investment goals, or that our recommended investment strategy will perform as anticipated. Please consult any available PPM or other offering documents for any security we recommend for a discussion of risks associated with the product.
The PPM contains important information about a particular investment’s business, operations, financial condition, and risks. The risks below include a summary of risk factors and is not meant to be all inclusive. These include the following:
Because the risks of each issuer and private placement are unique, it’s important to review the PPM or other offering material, understand the unique risks of the particular investment under consideration, and ask your registered representative additional questions about the business practices and risks associated with any recommended private placement.