OTCBB Securities Trading Rules

Introduction

TD AMERITRADE accepts orders for OTC Bulletin Board®, Pink Sheet®, and other Non-listed securities (hereinafter referred to collectively as Over-the-Counter Bulletin Board, or OTCBB, securities). Investing in OTCBB securities can be very risky. These securities represent low-priced shares of new or small companies, foreign equity issues, warrants, units, ADRs and DPPs that do not qualify for trading on a national stock exchange or on NASDAQ®. Instead, Dealers, who are not required to make a market in the security or to hold shares in inventory, trade the securities on a manual basis, over the telephone, in the “over-the-counter” market. Because the securities are not traded through automated or electronically linked execution systems, accurate quotation information and immediate executions may not be available and it is not uncommon for the manual execution process to take several minutes.

As a discount brokerage firm, TD AMERITRADE does not solicit or recommend transactions in OTCBB securities. Please review “OTCBB Securities Trading Rules” carefully to determine if investing in these securities is appropriate for your investment goals, financial resources, risk tolerance and experience. Because accounts with TD AMERITRADE are self-directed, please review the Terms and Conditions of your account and perform your own “due diligence” before investing in any security.

Important Topics

Placing Orders

For your trading convenience, TD AMERITRADE offers you three ways to place OTCBB security orders. These securities can be bought and sold using our Web site and Interactive Voice Response (IVR) telephone system, or through one of our brokers.
• Internet – Log on to your TD AMERITRADE account on our secure Web site, and click the “Trade; Stocks” page.
• IVR telephone system – Call us to place an order using our automated phone system.
• Broker – Call a TD AMERITRADE representative to place an OTCBB order with a knowledgeable, licensed broker, from 8 a.m. to 8 p.m. ET, Monday through Friday, excluding market holidays.

In all OTCBB transactions, TD AMERITRADE is acting as an agent. The commissions charged for these trades are determined solely by the method by which the order is placed. TD AMERITRADE brokers do not receive additional compensation, commissions or bonuses for placing orders for OTCBB securities. An order placed over our electronic (Internet or automated phone) systems will be charged commissions according to the electronic system used. An order placed through a broker will be charged broker-assisted commissions. For more information, please review our Commission Schedules.

Price quotes on these securities are also available through these same channels; however, OTCBB quotes are NOT automated and thus may not be updated as frequently as quotes for exchange-listed, NASDAQ or OTC National Market System (NMS) securities.

OTCBB Securities Trading Rules

Due to the nature of OTCBB securities, some restrictions apply to trading these equities at TD AMERITRADE. Please read these rules and the associated risks and restrictions thoroughly before placing orders to buy or sell OTCBB securities.

OTCBB securities can be bought or sold during regular market hours. No orders for these securities will be accepted for the Extended-Hours Trading sessions.

Only limit orders to buy, and limit or market orders to sell will be accepted. Limit orders may be specified as All-or-None, Day, or Good-Till-Canceled orders. No other types of orders for these securities will be accepted.

These orders may be placed over the secure TD AMERITRADE Web site, the IVR telephone system, or with a licensed broker.

Over 10,000 OTCBB securities are available to be traded, and investors should be aware that frequent symbol changes, additions, and delistings occur in the OTCBB market. If you place an order on a stock that has had a reverse split, forward split, symbol change, etc., your positions may not be updated immediately. It is your responsibility to be aware of the date on which such action is effective, to identify the type of split or name change on the stock and provide correct instructions, including accurate symbol and quantity information, when placing an order.

Quote information for OTCBB securities is available on our Web site and through the IVR telephone system. TD AMERITRADE does not guarantee the accuracy or timeliness of this information. Please verify market information with a TD AMERITRADE representative.

All stocks falling into this category are non-marginable. They cannot be purchased on margin, or be used as collateral against margin loans.

As stated in the TD AMERITRADE Terms and Conditions, your account(s) with TD AMERITRADE are self-directed. You are solely responsible for any and all orders placed in your account(s). TD AMERITRADE does not provide investment advice, therefore, any investment decision you make or strategy that you use is done so at your own sole discretion and risk.

Potential Risks Associated with OTCBB Trading

The risks associated with OTCBB trading include, but are not limited to, those listed in this document. These rules should not be considered to encompass a complete description of the risks and unique traits of OTCBB securities trading. You should seek additional independent information on this subject before trading in OTCBB securities. Trading in OTCBB securities may not be suitable for some investors, and you should assess the level of risk you are willing to accept before deciding to include these securities in your portfolio.

• Availability of quotes and order information – Because OTCBB trades and quotations involve a manual process, the market information for these securities cannot be guaranteed. In addition, quote information, or even firm quotes, may NOT be available. The manual execution process may delay order processing and intervening price fluctuations could result in the failure of a limit order to execute or the execution of a market order at a significantly different price. Execution of trades, execution reporting, and the delivery of legal trade confirmation may be delayed significantly. Please contact a TD AMERITRADE representative for the most current OTCBB security quote information available.
• Delays in order communication – Because electronic processing of orders is not available for these securities, high-order volume and communication risks may prevent or delay the execution of your OTCBB orders. This lack of automated order processing may affect the timeliness of order execution reporting and the availability of firm quotes. Heavy market volume may lead to a delay in the processing of OTCBB security orders, due to the manual nature of the market.
• Fraud – OTCBB securities are frequent targets of fraud or market manipulation. Not only because of their generally low price, but also because the OTCBB reporting requirements for these securities are less stringent than for listed or NASDAQ-traded securities, and no exchange requirements are imposed. Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden, sharp increase of price and trading volume and the equally sudden collapse of the market price for a security. You should carefully review all of the information regarding the company you intend to invest in, prior to trading in OTCBB securities, or any other investment.

Please report any suspected occurrences of fraud to your state securities administrator, the NASD or the SEC.

• Liquidity may be lower – When fewer shares of a security are being traded, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in many OTCBB securities, there may be a lower likelihood of your order being executed, and current prices may differ significantly from the price you were quoted at the time of order entry.
• Editing and canceling orders – Orders for OTCBB securities may be canceled or edited like orders for other securities. All requests to change or cancel an order must be submitted to, received and processed by the marketplace. Due to the manual order processing involved in handling OTCBB trades, order processing and reporting may be delayed, and it may not be possible for you to cancel or edit your order. Information on our Web site indicating order cancellation or editing does not guarantee that the order has not been executed. Please consult a TD AMERITRADE broker for verbal confirmation that your order has been canceled (also known as a “definite out”) before placing additional orders.
• Risk of loss – Investing in OTCBB securities can be very risky. You may lose all or part of your investment in OTCBB securities. These securities represent shares of new or small companies. The financial condition of such companies, as reported in a prospectus, can change very quickly. Any report (whether substantiated or not) of the company’s deteriorating financial position or news that would affect the company’s financial condition may lead to a dramatic decline in the price of a security.

The dealer’s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to you if the stock must be sold immediately, or you may incur an immediate “paper” loss due to the price spread. Moreover, the dealer may have no bid price on the security, making it impossible for you to sell your shares.

Reminder to our Clients

Due to the manual processes involved in trading OTCBB securities, the volatility inherent to these equities, and the absence of electronic order processing, quotes delivered through our systems, as well as other information for OTCBB securities, may not be as accurate and the execution of orders may not be as timely as they would be for NASDAQ, NMS or listed securities.

As described above, trading in OTCBB securities differs significantly from trading in NASDAQ and listed securities, and you may experience greater market risk. You should be familiar with these rules before investing in them. You should also take the time to read the prospectus and any other filings, including quarterly and annual reports, for a company carefully before you invest. Please gather research information from several independent sources, and, if necessary, seek the assistance of a professional or trusted advisor.

Please remember that all accounts with TD AMERITRADE are self-directed and you are solely responsible for, in your discretion and at your own risk, implementing or adopting any investment decision or trading strategy employed on your account.

Rule Changes

Rules regarding OTCBB security trading are subject to change without prior notice. Please check the rules on our Web site for amendments frequently. By participating in OTCBB security trading, you agree to the Terms and Conditions of your account presented on our Web site and the OTCBB Securities Trading Rules.